Avoiding pitfalls along service expansion path
October 1, 1999 5 minutes read
Avoiding pitfalls along service expansion path
Pennsylvania hospital points way to success
Deciding how you’re going to expand your continuum of care is the first step to success — or failure. Will you create a new program, buy another facility that has it, or form a partnership to provide it? There are advantages and drawbacks to each model.
Chambersburg (PA) Hospital has expanded its services in all three ways. By selecting the most appropriate model for a particular new service or expansion plan, the small rural hospital has found success, says Barrie Sheffler, administrative director of physical medicine.
Sheffler and health care consultant Cecily Lohmar, CHC, of Arista Associates in Fairfax, VA, offer these examples and guidelines to the three different expansion models:
1. Create your own. "It works best to develop or make your own service when your internal capabilities are strong and you have the expertise within your organization," Lohmar says.
It also helps if the new service is low-risk. For example, entering the nursing home arena might be considered high-risk, whereas moving into sports medicine is relatively low-risk. It’s much more costly to acquire a nursing home or build one than it is to buy some equipment and train staff to move into the sports medicine field, she explains.
The pros for making your own program, according to Lohmar, are that your facility will reap the full reward of its success and that you can do it your own way. Also, the new program will inherit your internal culture automatically. (See checklist on determining pros and cons of various expansion models, inserted in this issue.)
The disadvantages include the following:
• You’ll take the full risk of failure.
• A new program might take a long time to develop.
• Starting the program and trying to gain market share may have a high cost.
• Inheriting the facility’s internal culture may be a drawback as much as a plus.
Officials with Chambersburg Hospital wanted to expand services to include incontinence rehab. After researching the competition, they found that no one in their immediate area offered that service, Sheffler says. "Since there was no one we could collaborate with, this was a situation where we needed to develop it ourselves," he explains. "So we trained our own staff, implemented the program, and marketed it."
The planning process took about nine months. The training was time-consuming because the hospital sent employees to out-of-town clinics to watch how they handled incontinence services. Marketing the new service proved to be as difficult as planning and training. "It took us a good year to where we created the relationships and referral mechanisms for existing referral sources for that program," Sheffler says, adding that the program now receives plenty of referrals.
One drawback to starting your own service is the cost of training staff. Besides the educational and travel expenses, the hospital had to take employees away from their jobs, and that was expensive from a productivity standpoint, Sheffler says.
On the positive side, starting the new service gave the staff some additional experience and helped keep them interested in their careers at the hospital. "Our staff came up with the idea for the incontinence program, and we value their input and their drive," Sheffler says. "Adminis tra tors can’t do it all, so building a program from within requires a lot of staff buy-in and giving them support and encouragement while management gets all the barriers out of their way."
Whenever you’re building your own program, it needs to be consistent with the vision and mission of your organization, Sheffler notes, "and the incontinence program was very consistent with other areas of rehab that we were doing."
2. Buy what you want. It’s time to buy when your own organization doesn’t have the expertise in-house and when a lot of providers in your market already offer what you want to sell. Buying also is easier when you want to get into a particular market niche quickly, Lohmar says. "You can acquire the expertise and market overnight," she adds.
Another advantage is that the new service will provide an immediate volume and revenue stream.
The disadvantages of making such a big purchase are that an organization must come up with the capital resources and play a valuation game that could get tricky if there are competitors also looking to buy a particular service.
Chambersburg Hospital bought a local health club that also had a private-practice physical therapy component. "They were interested in joining with a larger health care provider in the area," Sheffler says, "and it provided us with an oppor tunity to buy the practice and fitness center." The advantages were that Chambersburg Hospital acquired the expertise and benefited from owning an entity with positive community visibility. "Also, it allowed us to pull in the fitness piece, which enhanced the therapy components that we were already doing," Sheffler adds.
"Since we purchased it, we have significantly expanded the physical therapy component there and added an occupational therapy component to it," he says. "Out of that acquisition, we’ve also grown and enhanced our occupational medicine program, which is located immediately adjacent to the facility."
3. Find a partner. Finding a partner is similar to buying in that a facility can reap the rewards of a rapid market entry and gain expertise in a particular field. It has the added benefit of shared financial risk and limited investment costs, Lohmar says. The drawbacks are that partnerships require a careful selection process to make sure the marriage will work, and it’s always possible to find ownership and control issues that need your attention.
Lohmar recommends rehab facilities consider partnerships when a service is new for them and somewhat high-risk. Partnerships also help when a new service may not be a big money-maker but will have other benefits, such as giving the facility greater continuum of care.
Chambersburg Hospital is collaborating with Easter Seals to provide managerial oversight and some clinical support staff to help the nonprofit organization with its own services in rehabilitation. Waynesboro (PA) Hospital, located 25 miles away, had been using Easter Seals for inpatient therapy services. When that hospital joined with Chambersburg Hospital to form Summit Health, the two hospitals and Easter Seals became partners. By working together, the hospitals and Easter Seals could provide a continuity of rehab services, Sheffler says.
"So collaboration is the best way to go, and everybody gains," he explains. "We’ve been working with Easter Seals for three years," he says. "Our greatest challenge has been to provide consistent, high-quality services at both facilities, and we’ve succeeded at developing a rehabilitation continuum of care."
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