Why systems are pumping billions of dollars into outpatient care
By Alex Kacik / December 2, 2024
Health systems are boosting investment in outpatient expansion as some convert acute care hospitals to meet the growing demand for mental health, long-term care and other ambulatory services.
Health systems are pumping billions of dollars into outpatient construction, which executives say their organizations will need as the population ages and as patients spend less time in the hospital. At the same time, some health systems are downsizing their acute care network to make space for an increasing number of patients managing anxiety, depression and other mental health issues and recovering from major procedures.
“We’ve got to get away from this idea of heads and beds and being a hospital system,” Jefferson Health CEO Dr. Joseph Cacchione said. “That’s sick care. We need to truly be a health system.”
Here’s what to know about hospital outpatient expansion plans and capital spending trends.
How much are hospitals spending on ambulatory expansion?
Hackensack Meridian Health has invested about $500 million in two dozen outpatient expansion projects planned or under construction, said Robert Garrett, CEO of the Edison, New Jersey-based health system.
That includes a $200 million mixed-use development, featuring outpatient services and office space built around the Woodbridge Metropark train station, a venture with One Medical that aims to open 20 primary care clinics, and a virtual primary care initiative with the digital health company K Health, he said.
“We’re going to continue to invest in ambulatory care, where more surgical procedures and cancer treatments are being done,” Garrett said.
About a quarter of HCA Healthcare’s more than $5 billion in projected capital spending in 2024 is on outpatient facilities. The Nashville, Tennessee-based system has dozens of freestanding emergency departments, urgent care sites and ambulatory surgery centers under development, executives said.
“We’re interested and see good growth in outpatient in our communities and in our volume picture,” HCA Chief Financial Officer Michael Marks said Nov. 21 during the Stephens Annual Investment Conference.
Tenet Healthcare, the Dallas-based hospital chain, spent close to $500 million on 45 new outpatient facilities in the first quarter alone.
In April, Jefferson opened a $762 million multi-specialty outpatient center in Philadelphia, featuring 300 exam rooms, 58 infusion chairs, 10 operating rooms, six endoscopy rooms, an onsite lab, a pharmacy and radiology services.
How are hospitals repurposing inpatient space?
Some health systems are converting relatively low-volume acute care hospitals to rehabilitation and mental health facilities.
“What a lot of systems are doing is repurposing inpatient space for behavioral health or long-term care, instead of sending patients to unaffiliated specialty hospitals,” said Brian Platton, a healthcare lawyer at the law firm Holland & Knight who advises providers.
Franciscan Health Dyer announced plans this month to convert its Dyer, Indiana, hospital to a behavioral health campus in 2027. Mishawaka, Indiana-based Franciscan Health needs to adjust to meet the growing need for mental healthcare, the organization said in a news release.
Last year, Jefferson transitioned its 60-bed acute care hospital in Elkins Park, Pennsylvania, to a specialty rehabilitation hospital. That change has freed up capacity at the busy Jefferson Abington Hospital, which transferred its rehabilitation services to Elkins, Cacchione said. Both hospitals are doing better financially, he said.
“The success of [Elkins] is now far greater than it was a middle-of-the-road community hospital,” Cacchione said.
Why are hospitals investing in outpatient care?
Patients are spending less time in the hospital. As a result, providers need broader rehabilitation, skilled nursing and long-term care networks to facilitate care transitions.
Hospitals’ average length of stay has declined over the years. Average length of stay in September year-to-date declined 4% from the same period in 2021, according to data from the consultancy Kaufman Hall.
Patients’ hospital stays are declining as new technology and easing regulations allow providers to perform more procedures in surgery centers. Providers are incentivized to invest outside of the hospital, experts said.
“As technology advances, procedures get more fine-tuned and there is more of a move toward outpatient care, patients want to be in and out,” said Heather Delgado, a healthcare attorney at the law firm Barnes & Thornburg who advises providers. “That is where we are headed.”
Will outpatient care reduce the need for inpatient beds?
While more types of care continue to shift to outpatient settings and the home, demand for inpatient beds isn't expected to decrease significantly, most industry observers said.
Many health systems, especially those in urban areas, are grappling with capacity constraints across their hospital networks. The aging population and the growing prevalence of chronic diseases are expected to keep acute care hospitals relatively full in most markets even as systems add outpatient care capacity.
Health systems are only expected to reconfigure and consolidate their lower-volume inpatient spaces to meet the growing demand for community-based outpatient services, experts said.