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The Johnson County Business Times March 19 - March 25, 1998 Vol. 5, No. 8 MUSCLING IN
New Outpatient Surgery Center May Have A Big Impact on Hospitals By Jeff Goodman, Contributing Writer While the new orthopedic and outpatient surgery center under development in Leawood was announced last month with little fanfare, it could have a significant impact on the revenues of Saint Luke's South and other local hospitals. Called the Kansas City Orthopedic Center, the two-story, 45,000-square-foot facility is being planned by three groups of orthopedic surgeons that have practiced at Saint Luke's Hospital and Shawnee Mission Medical Center. According to plans on file with the city of Leawood, the surgery center will be located on 5.6 acres near College Boulevard and Tomahawk Creek Parkway and will include medical offices, surgical suites and other services. It's a joint venture between Dickson-Diveley Midwest Orthopaedic Clinic, Inc., Orthopaedic and Sports Medicine Clinic of Kansas City P.A., and Orthopaedic and Sports Medicine Consultants, Chtd. The group's request for a special-use permit is slated to go before the Leawood Plan Commission on March 24. A spokeswoman with Saint Luke's-Shawnee Mission Health System says the new surgery center won't have any ill effects on her group's two Johnson County hospitals, but industry observers aren't so sure. "Because of the physicians involved and the hospitals they have traditionally used, the new center will likely draw some patients from Shawnee Mission Medical Center, significantly impact Saint Luke's Johnson County campus and, to a lesser extent, affect Menorah Medical Center and Saint Luke's Plaza location," says Dr. Edward Prostic, an orthopedic surgeon and past president of Menorah's medical staff. The specific financial impact on Saint Luke's South and other local hospitals cannot yet be quantified, but industry statistics suggest that the new center will garner a significant chunk of this area's outpatient surgery volume. The average free-standing surgery center in Kansas offering orthopedic services performs nearly 2,300 surgical cases each year and generates annual revenues of more than $2.5 million, according to Scott Schmitz, project manager for acute care with Chicago-based SMG Marketing Group, which conducts surveys of outpatient surgery facilities. "Freestanding surgery centers have consistently chipped away at hospitals' share of the outpatient surgical market," Mr. Schmitz says. Nationally, hospitals' share of that market dropped from 76 percent in 1990 to 64 percent in 1996, SMG reports. The decline was attributed, in part, to a 54 percent increase in surgeries at freestanding centers. A freestanding center with a focus on orthopedics could be particularly threatening, in that orthopedics is often a large portion of a hospital's outpatient surgery volume. For instance, orthopedics represent 26 percent of Menorah's outpatient surgeries, according to a hospital spokesman. The new center's ability to compete with local hospitals will depend largely on its success in contracting with managed care plans. HealthNet, with its large local enrollment, is owned by Saint Luke's-Shawnee Mission and other hospitals. A HealthNet spokeswoman, Cheryl Dillard, says officials with the health plan would consider the Kansas City Orthopedic Institute group just like any other provider. Standard procedure would be to determine the following: whether there is a compelling need in the marketplace; how the center would fit with HealthNet's medical management programs; and the market demand for additional services. Mr. Dillard says HealthNet does not currently contract with a freestanding outpatient surgery center. Surgeons have many reasons for developing their own outpatient centers, including financial gain, increased management efficiencies, and the ability to provide lower-cost care, according to Joseph Zasa, a partner with Ambulatory Systems Development, a national consulting firm. Like most doctors, orthopedic surgeons have faced downward pressure on their incomes, says David Scroggins, practice management consultant with Clayton L. Scroggins Associates in Cincinnati. "Reimbursement from managed care and Medicare has been attached pretty severely in recent years," he says. "These physicians still do pretty well, but not relative to prior years, so they begin asking, 'What are other revenue source possibilities?'" Mr. Zasa adds that outpatient surgery centers typically offer fees 30 to 40 percent lower than those at hospitals. For patient with sports injuries, Dr. Prostic says, the new center could prove to be a better facility than what is available today. "I think this new center is a nice opportunity to have a building that is dedicated to sports medicine and run by people who are expert at it," he says. Officials with the physician groups involved in the Leawood project won't discuss details, saying only that plans are evolving. However, depending on the center's ownership structures, the partners could be limited in making referrals. The so-called "Stark II" legislation generally prohibits doctors from referring Medicare and Medicaid patients to imaging and physical therapy services that they own, according to lawyer Mark Thompson, a partner with Seigfreid Bingham Levy Selzer & Gee in Kansas City, Mo. In any case, having a new surgery center backed by three strong orthopedic groups could mean the availability of cheaper surgery services in this area and will almost certainly make life tougher on hospitals, which are relying increasingly on outpatient procedures. Still, Marty Lanus, a spokeswoman with Saint Luke's-Shawnee Mission, insists that the Dickson-Diveley-led group will only complement what Saint Luke's South and Shawnee Mission Medical Center are doing. "Both Saint Luke's and Dickson-Diveley are committed to finding new and better ways to treat patients," she says. |
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