Investor-owned hospital chain HCA Healthcare declined an interview but pointed to its first-quarter earnings call for details on service-line management. In it, CEO Samuel Hazen said its cardiac volumes were up 3%, electrophysiology was up 5% and cardiovascular surgeries were up 4%. As HCA builds out service line capability across the system, that yields more revenue per patient, he said.
“Those things still have room to grow,” he said on the call. “And as we see continued momentum in the markets with job growth and strong economies, we think that portends reasonably well for us over the course of 2019.”
HCA has a service-line team that supports physician recruitment, program development, technology deployment and patient navigation that has boosted those volumes, he added.
Generally, lower-margin business like obstetrics, behavioral health and primary care seem more vulnerable. Obstetrics, for instance, has been declining throughout the country—about half of rural counties lack the capacity, according to a 2017 study published in Health Affairs.
Providers have to think about their affiliated network when it comes to obstetrics, pediatrics, mental health and other services that have traditionally been loss leaders, Skea said. The University of Alabama at Birmingham Health System, for instance, has shared some of its specialists, administrative capacity and telehealth solutions with struggling rural hospitals.
“Some of those things can be done in smaller, lower-cost settings,” he said. “Systems need to act like systems rather than an affiliation of competing entities.”
Meanwhile, there’s an arms race for state-of-the-art oncology networks, proton therapy, orthopedics and cardiology.
The industry is getting close to an imbalance of services, Keckley said. There are acute shortages and a lack of capital for certain services in rural and nongrowth markets that do not seem to be abating, he said.
“A lot of systems view this as doubling down on their core business, especially academics,” he said. “But that exposes them to private equity and other aggregators of community-based services. If employers decide to push risk on primary-care groups through some capitated model, that is a fault line for those doubling down on tertiary and quaternary services.”
High-cost service lines create an opportunity for an independent physician group like Kingsport, Tenn.-based Holston Medical Group, CEO Dr. Scott Fowler said. If it costs about $45,000 to perform a total hip replacement in a hospital, Holston can do it for $20,000.
“Service lines that are overutilized in high-cost systems are ones we want to control in our value piece,” Fowler said. “We lose control when we go into models driven by profit rather than value.”
Obstetrics is a long-term investment, even if it loses money, he said. It’s important to offer those services since women are the primary healthcare decisionmakers in most families, Fowler said.
“If the viability of your organization is dependent on cutting service lines that don’t make money, you need to ask yourself if it is better to be here for some things or not to be here for anything,” Jefferson’s Meyer said. “These are hard decisions that make you uncomfortable. You lose a lot of sleep before and after the decision.”
HCA’s commercial obstetrics volume was up about 6% in the first quarter of this year while its Medicaid volume dropped, which flattened admissions for the quarter. Still, the hospital chain has tried to become a destination for women’s services, Hazen said.
“That’s working for us in markets where we’ve made those investments. And we’ll continue to look at, again, transporting that idea more broadly, so that we can pick up market share,” he said on the earnings call.
Correction: An earlier version of this story misstated where Holston Medical Group is based. This error has been corrected.