In suburbs across the country, hospitals are in the midst of fierce battles for patients, physicians and insurance dollars.
Even though hospitals claim "expansion strategies will lead to greater efficiency and improved care," the competition has the potential to lead to "duplicative services and higher costs," says a new paper, written by the Center for Studying Health System Change and published this month in the journal Health Affairs.
In lean times, when government reimbursement dollars for programs like Medicaid get squeezed, hospitals compete more heavily for well-heeled customers to bring in more cash, according to a new study.
In Indianapolis -- one of 12 metropolitan areas studied -- researchers found competition for well-insured patients in the growing area north of downtown is so fierce, with top health systems building new hospitals and ambulatory care centers, that observers call it the "Exit 10 strategy," named for the Interstate 69 exit north of the city.
Hospital officials "make several cases for these types of expansions," said Emily R. Carrier, lead author on the paper and a senior health researcher at the Center for Studying Health System Change in Washington, D.C., a health care think tank.
"They may say the demographics are shifting, (that) we're just following where people are living," Carrier said. "Or that the care model they offer is superior to what their competitor is offering."
But insurers and industry observers in those competitive regions often worry that the arms races between health systems adds to the cost of care without creating better outcomes.
Unlike the rest of the free market -- Carrier used the example of competing burger chains -- an increase in supply, capacity and competition in health care does not always lead to lower care prices.
The study found the recession intensified large capital expenditures, rather than curbed them, partly because hospital executives believe capturing new audiences is the best avenue to new growth.
The study looked at markets such as the fast-growing South Carolina region of Greenville-Spartanburg, where hospital systems are building "new, full-service hospitals outside of their traditional market boundaries and in communities with well-insured populations."
In an area of suburban Miami known as Kendall, the Baptist Health South Florida system opened a new hospital in April 2011, less than six miles from an existing medical center, the study says.
Two major Cleveland systems -- Cleveland Clinic and University Hospitals -- have been goading each other for years. In February 2011, University Hospitals opened the full-service Ahuja Medical Center just a few minutes from Cleveland Clinic's existing Beachwood Family Health and Surgery Center.
Cleveland Clinic, meanwhile, bought the Medina General Hospital in Medina, Ohio -- just a few blocks from University Hospitals' new outpatient and urgent care center -- and is building a $76 million addition at its Fairview Hospital on Cleveland's West Side. In the same time period, Cleveland Clinic closed the "struggling safety-net" Huron Hospital, in the low-income neighborhood of East Cleveland.
"Yeah, new stuff is going in, out in the more affluent neighborhoods," said Bill Ryan, president and CEO of the Center for Health Affairs, the trade association for Cleveland-area hospitals.
"But more than a billion dollars of capital investment went into the core city" over the last decade, he said..
Ryan added that capital investments "gets programmed, five, six seven years in advance. There's always a little bit of angst from the insurers" when they see hospitals building at full bore, but "patients love it."
The Center for Studying Health System Change study was funded by the Robert Wood Johnson Foundation and the National Institute for Health Care Reform.
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