It’s been predicted that healthcare’s ambulatory care sector will grow rapidly, posting the highest profit margins. We are witnessing it come true, leading to the inescapable conclusion that investing in this trend is the only way forward. Many health systems have seen the results, and more opportunities await companies that quickly head in this direction.
Ambulatory care comprises one-third of provider revenues in the US, totaling about $750 billion. A wide range of services is included in ambulatory care, including physician practices, outpatient behavioral health centers, ambulatory surgery centers, and urgent-care centers.
Understanding ambulatory care
Ambulatory care refers to any medical care not provided in a hospital or facility that requires admission. It consists of four subcategories:
- Wellness: Medical care is provided in doctors’ offices, counseling centers, and via telemedicine (preventive and primary medical care).
- Diagnosis: Various types of scans, as well as blood tests.
- Treatment: Surgical procedures, addiction treatment programs, cancer treatments, and other types of therapy.
- Rehabilitation: Post-operative therapy, including occupational therapy (OT), physical therapy (PT), and addiction therapy.
Ambulatory care settings save time and help patients undergo surgery and return home the same day. They also cut down on hospital visit time — 25% shorter than comparable hospital outpatient visits —with lower complication rates. For example, ambulatory-care services have 1.1 percent of hip arthroplasty complications compared to 5.2 percent in hospital settings.
Ambulatory care will own the future
According to a McKinsey study, approximately 32 percent of hospital activity is expected to be delivered in ambulatory settings within the next ten years. The increase represents an average growth of 12 percent per year, with significant differences across specialties. In particular, orthopedics is expected to grow from 5 percent to 26 percent ambulatory activity in the next decade. In comparison, cardiology is expected to grow from 16 percent to 40 percent.
A significant change in specific high-volume procedures is driving these growth rate projections. For example, it is estimated that 30 percent of the Total Knee Replacement (TKR) cases will shift to ambulatory care over the next ten years. In cardiology, 59 percent of the catheter placements will move to ambulatory care over the same period. In addition to cardiology and orthopedics, other procedures are likely to have significant innovation and changes in the site of care, as well as greater interest from physicians to shift procedure volumes away from hospitals.
As clinical practice innovations continue, ambulatory settings will be able to offer additional care.
Are health systems gathering speed or moss?
Despite the opportunity available, health systems are not ready to launch into the ambulatory phase. Only 40 percent of providers are making meaningful preparations with new facilities, updated clinical guidelines, patient education, and incentives for physicians. And it’s only the tip of the iceberg. Healthcare systems may consider the following actions to increase success:
Integrate surgeons with Ambulatory Surgery Centers (ASCs)
The first step is to create a strong alignment with surgeons. They are the engines that drive ASCs. Typically, hospitals/health systems overinvest in ASC’s physical assets such as location, layout, equipment, etc., and underinvest in surgeon relationships. Partnerships between health systems and physicians that include shared equity can facilitate shared decision-making on investments and costs. As a result, financial performance improves, and clinical quality is maintained.
The governance of the ASC is likely to require a core group of surgeons, and health systems need to seek out surgeons who will partner with them in operating and championing ASCs. Motivated and integrated surgeons are force multipliers. In addition to recruiting other surgeons, they are a solid ally in negotiating with suppliers. But if the surgeon-provider relationship is misaligned, an ASC can run into headwinds.
Talent spotting for ambulatory leadership
Health systems must identify strong operational talent, such as medical directors, directors of nursing, and administrators, to play significant leadership roles and manage ASCs effectively. It is also a good idea to partner with a management company.
Health systems must take advantage of the staffing models at such sites and operationally gain by having surgeons work with a set of dedicated nurses and assistants, unlike traditional hospital operating rooms that often rely on floating nurses.
Add value to ambulatory care
Leveraging existing relationships with physicians and surgeons can help hospitals/health systems aggregate patient volume. Along with the funding and infrastructure of billing, collecting, and regulatory requirements, this volume may be an asset when negotiating with payers and suppliers. It might be a good idea for a hospital/health system to promote its ability to handle these tasks, freeing doctors to focus on patient care.
Last but not least, a hospital may be able to develop and furnish specialized equipment on-site using its capital. A small group of surgeons is usually not comfortable pursuing this level of funding.
Transforming operations
Ambulatory care services are a boon to patients, but they can be improved and finessed for a more significant impact. The expansions can include the following:
- Increase patient awareness.
- Redesign clinical pathways to support clinicians in safe decision-making.
- List evidence-based alternatives to inpatient care.
- Establish risk-mitigation protocols, such as a plan for inpatient transfers.
- Provide staff with training in high-quality care outside the hospital setting.
- Adjust workforce plans and rosters for changing operations.
- Analyze metrics and reporting to identify unwarranted variations.
- Promote collaboration across ambulatory care sites.
- Match contracting strategy with shifts at the care site.
Many doctors (physicians and surgeons) run small offices at different locations, and local patients prefer to visit them for a consultation. But these offices lack the infrastructure to carry out complex procedures because doctors do not have the capital to convert them into ambulatory care units. Most of these offices also do not have an arrangement with the insurance companies.
Healthcare costs can be controlled when healthcare systems and insurance companies work together. If the cost is brought down, the profit margin will increase. Healthcare systems must negotiate with insurance companies and ensure their contracts with the insurance companies are flexible at a granular level to optimize the services of ambulatory care units.
Hospitals/health systems can invest in capital and appoint administrative and operational staff at the small offices run by doctors to convert them into efficient and quality ambulatory care units.
This shift represents a “win-win” between payers and health systems as it reduces overall costs while maintaining or growing margins for healthcare providers. However, operational discipline is the foundation to achieve this goal.
According to McKinsey, the traditional acute-care setting will continue to face profit margin pressures, while outpatient and ambulatory settings will grow more than 5 percent annually between 2021 and 2025. It significantly contributes to current procedures performed in inpatient settings to move safely and effectively to ambulatory care settings over the next ten years. It will exponentially raise the value of ASCs.
It is time for health systems and hospitals to shape the future and not be shaped by it. Those who align with patients, payers, and physicians will reach this goal faster.
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