Anna Brewer and Herd Midkiff
In response to numerous market and regulatory pressures, the health care delivery system is rapidly evolving. In particular, two forces are changing how health care is delivered to patients in the Dallas/Fort Worth marketplace: provider consolidation and health care entrepreneurialism. Since the passage of the Patient Protection and Affordable Care Act, or Obamacare, rarely a day has gone by without a major headline related to health care. During the fall of 2013, the news was dominated with stories about the broken Federal Health Exchange website. This spring, insurance coverage mandates and Supreme Court decisions dominated the news cycle. In the fall, the focus likely will turn to the level of premium increases for employer and exchange-based health insurance. While each of these stories centers on the health care consumer, the health care provider side of the equation is making news, as well. Health care providers (hospitals, physicians, nursing homes, etc.) are charged with providing quality, efficient and effective health care services in an era of enhanced government scrutiny, an aging population, reimbursement uncertainty and an increasingly savvy consumer. Health care providers are responding to these pressures with consolidation, integration and consumer-driven service delivery models.
Provider consolidation To navigate these challenges, large health systems are pursuing a consolidation and integration strategy. In October 2013, Baylor Health Care System and Scott & White Healthcare merged to become Baylor Scott & White Health. The consolidated organization is comprised of 43 hospitals, 500 patient care access sites and more than 1,600 employed physicians located in north and central Texas. Arlington-based Texas Health Resources – itself a creation of a merger between Harris Methodist Health System and Presbyterian Health System in 1997 – has grown to 25 hospitals while its affiliate, Texas Health Physicians Group, employs more than 800 physicians who provide services at more than 230 locations in the Metroplex. Both of these organizations are pursuing physician alignment and integration strategies reflective of nationwide trends. According to data from the Medical Group Management Association, 63 percent of physician respondents to its annual survey were employed by a hospital or health care system. This is up from 42 percent four years ago and the trend shows little sign of slowing down.
Health care entrepreneurialism Health care entrepreneurialism also is shaping the way north Texans receive their health care. Consumers have indicated a desire for greater convenience and specialization in health care. In response to this demand, walk-in clinics, free-standing emergency rooms and specialty hospitals have been sprouting up around Fort Worth at a record pace. Physician investors, private equity groups and large publicly-traded companies often back these entities. For example, Concentra is a subsidiary of Humana, Inc., one of the nation’s largest health insurers. Concentra operates 16 urgent care/walk-in clinics in Dallas-Fort Worth, with five of these centers located in Tarrant County. Drugstore operator CVS Caremark, Inc. has opened 25 Minute Clinics in north Texas. These clinics, which are located inside CVS stores, are staffed with nurse practitioners and physician assistants who are able to treat and diagnose minor illnesses and injuries. These clinics are open on weekends and evening and no appointment is required. Other companies, such as First Choice Emergency Room and ER Centers of America, operate fully licensed ER facilities staffed with emergency room physicians apart from a hospital. These free-standing emergency rooms offer convenience and short wait times for patients. Finally, boutique or specialty hospitals are filling a market niche by focusing on providing only a few types of procedures such as orthopedic surgery, gastrointestinal surgery and brain/spinal surgery. Forest Park Medical Center, opening a Fort Worth location in September, is one example of this type of facility.
Working together Provider consolidation and health care entrepreneurialism may prove to be complementary. Not-for-profit health systems, tasked with improving the health of the whole community, provide a broad spectrum of health care services to patients. Often this includes providing services to patients who cannot afford care, for which the health systems receive little or no reimbursement. By consolidating, hospitals can increase efficiency, stabilize reimbursement through increased negotiation leverage with insurance companies and achieve cost efficiencies through economies of scale. At the other end of the spectrum, the entrepreneurial entities help to spur competition, which in turn can drive innovation in delivery methods and enhance the patient experience. For now and in the immediate future, both of these forces will continue to shape and change the way patients seek and obtain care in North Texas.
Anna Brewer and Herd Midkiff are co-directors of the consulting services division of J. Taylor & Associates, LLC, a Fort Worth-based professional services firm providing health care consulting, tax, assurance and valuation services to clients locally and throughout the country.