Impending Death of Hospitals

Mitigating Against Risk to Physician Groups of Hospital Closure

Another week, another hospital closes. Well, at least one.

Yes, this is a popular topic for the blog, because each additional hospital closure underscores the risk for physicians and medical groups that don’t spread risk. The lesson applies to both hospital-based and office-based physicians, although not necessarily equally.

Yesterday, February 11, 2018, was the final, lights out, closing day for Quorum Health’s Affinity Medical Center in Massillon, Ohio.

According to pre-closure filings, 692 employees were to be laid off, along with 116 people employed by the affiliated Doctors Hospital Physician Services.

The physician clinics operated by the hospital will remain open until early March in order to allow ownership to be transferred to the affected physicians or other local providers.

Not all is necessarily lost, because after the facility and related entities are completely shut down, the former Affinity’s physical plant will be turned over to the city of Massillon, which, it seems, will try to make another go of it.

Here are some of the bottom line lessons for you:

Office-based physicians located on, or even near, hospital campuses must take possible hospital closure into account when negotiating leases. Will closure trigger your right to terminate the lease? Sure, it’s great to be able to walk from your office over to the hospital for rounds and for meetings, but I can tell you from the experience of representing physicians who had no such termination rights, that continuing to maintain an office next to a boarded-over facility with weeds sprouting up from cracks in the asphalt, in an office-building that’s half abandoned, isn’t great for business.

Physicians must consider the risk, not just the supposed relief, of hospital employment or even of tight affiliation. No more hospital, no more employment. Sure, you might have the ability to “re-start” an independent practice, but without any of the support mechanism (office, staff, equipment, medical record system, accounting system, etc.) that you didn’t have to worry about when you (thought you were) letting someone else, the hospital, worry about it for you, so that you could “just practice medicine,” that is, until they ran the business into the ground.

Unless the hospital-based groups practicing at Affinity have other practice locations, they’re either out of business or on an extended vacation until, and if, the facility reopens and they regain their positions. If you’re dependent upon one facility, then the absence of that facility moots the necessity for your existence.

The patients who would otherwise receive care at Affinity will go somewhere. Perhaps to competing hospitals in neighboring towns. Perhaps to ASCs and other outpatient facilities that you and other physicians can legally have ownership in. Affinity closed because it suffered huge financial losses. The next owner of the facility, if it ever actually re-opens, the city, will at least have some ability to tap into unwilling peoples’ pockets (i.e., taxes) to subsidize the facility. It might or might not work. The hospital business model is broken. And, you can take advantage of that fact.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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Impending Death of Hospitals | The Business of Healthcare

Hospital Becomes Hole in Ground. ASC Takes up the Slack.

In what might seem to some like ancient history and to others as a clarion call, in June 2010, New York City’s approximately 400 bed, 160 year old St. Vincent hospital, the last Roman Catholic general hospital in the city, closed its doors for the last time.

In late 2017, a competing non-profit opened the modern variant of a replacement “hospital” right across the street: a 6 O.R. ambulatory surgery center located in a facility with an emergency department, an imaging facility, physician offices, and other healthcare services.

Other than in respect of the freestanding emergency room, which, depending on state law may or may not be possible to license (or even wanted), there’s nothing in the concept of the replacement facility that couldn’t be created by you as a physician-led, physician-owned, for profit venture. In fact, it’s exactly along the lines of what I’ve termed a Massive Outpatient Center™:  A combination of an ASC, a medical office building, and one or more of a menu of complementary offerings.

For some, thinking becomes ossified along historic lines: “Hospitals build hospitals.” “Physicians just practice medicine.” “Physicians can’t own hospitals.” But none of these is necessarily true.  But, even if they were, opportunity is more malleable. What’s functionally like a hospital need not be a hospital.

If I were wrong about this, St. Vincent’s would be celebrating its 168th anniversary. It’s not. A 200-unit condo complex stands in its place.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

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