Hospitals expand to attract well-insured patients

Targeted geographic expansion into new markets with well-insured people is the new frontier for hospitals seeking a competitive edge in the marketplace, according to a study by the Center for Studying Health System Change (HSC) published in the April edition of Health Affairs.


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The study, “Hospitals’ Geographic Expansion In Quest of Well-insured Patients: Will the Outcomes Be Better Care, More Cost, or Both?” found that many hospital systems are seeking well-insured patients beyond traditional market boundaries, both in prosperous suburbs and in nearby areas with growing, well-insured populations.

Funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform, the Health Affairs study is based on HSC’s 2010 site visits to 12 nationally representative metropolitan communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in these markets since 1996.


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Key hospital strategies to expand into new markets include building full-service hospitals, establishing freestanding emergency departments and other outpatient services, acquiring physician practices, and operating medical transport systems – all aimed at shoring up referral bases and capturing additional inpatient admissions, the study found.

“Whether these new hospital competitive strategies will raise costs, improve care or both is hotly debated – payers and competitors contend such strategies will lead to higher costs, while hospitals assert the expansions will increase efficiency, increase access and improve the quality of patient care,” said HSC Senior Researcher Emily R. Carrier, MD, coauthor of the study.

According to Carrier, a common trend “seems to be location, location, location to a certain extent. (Hospitals are adding facilities) that are convenient to the right areas, not always near rich people per se, but near communities where most of the people are insured. A lot of them are also building near major highways to make them very accessible.”


“What we found is that a consistent finding of our study of all the years is there really is a lot of diversity in healthcare, so with this there is also diversity,” added Carrier. “Not every market is the same … (it’s) an indication that people should look around in their community and see what is going on.”

Other key study findings include: