Kettering Health Network is planning to add more doctors, two more hospitals in Troy and Middletown and has plans for adding services on a half-dozen other sites in the region.
Kettering Health, a network of hospitals, emergency rooms and doctors practices with annual revenue of $1.58 billion, said its goal is to improve community health and get closer to patients who are already driving to other cities to see Kettering Health doctors.
But Premier Health — Kettering Health’s main competitor in the Dayton region and the largest health network in Southwest Ohio — said these growth plans may not actually mean more health care options for residents. They might even mean fewer options, Premier argues, if new hospitals in Troy and Middletown take a big enough bite out of Premier’s revenue and prompts them to scale back jobs and services. Premier last year had $1.77 billion in revenue.
Nationally, patients and insurance companies are pushing for cheaper care in more convenient settings. Kettering Health says it is responding to these market forces with its plans for the two new facilities in Troy and Middletown. While each is projected to have a small number of beds for overnight stays - a traditional role for hospitals - they will primarily be intended to provide outpatient services.
“What we’re trying to do is anticipate where health care is headed and to plan for that in a very meaningful matter.” said Roy Chew, president of Kettering Health Network.
He characterized the hospital’s construction plans as “a major investment.”
Duplication not good
Premier CEO Mary Boosalis said it wouldn’t be good for either system to have full market share in a community, but also said it’s “ludicrous” for Kettering Health to add a hospital near another hospital.
“If either of us strips too much from the other, no one is going to have those services because we won’t be able to afford them because we’ll have duplicated ourselves out of business,” Boosalis said.
Kettering Health isn’t the only health system that’s placing its bet on smaller hospitals and outpatient services.
Lean hospitals with small amount of beds are being built throughout Central Ohio. National health systems have also been counting on outpatient services, not full-service hospitals, for future growth.
But Premier officials said Kettering Health’s proposed plans won’t be growth. It will be a shift.
Kettering Health has announced plans to build a $60 million hospital in Troy and a $30 million Middletown medical center. Premier Health has operated the only hospitals in each community for years.
If Kettering Health adds hospital services right across from Premier’s hospitals and it lures away patients from Premier who pay for services that make money, then Premier officials say they may not be able to keep subsidizing other services that it offers at a loss.
Premier offers medical services like addiction treatment and burn care but the health care network’s top officials say insurance doesn’t pay the hospitals enough for those services to cover the costs. It subsidizes them with revenue it makes from its profitable services and if their business suffers from the new competition they may have to cut back.
A Kettering Health spokeswoman rejected that argument and said both hospital systems face the same economic forces.
“All hospitals struggle with the same service-mix and same payer-mix challenges in the current health care environment,” said Kettering Health spokeswoman Liz Long.
Growth in Middletown
The recent public backlash from Premier came after Kettering’s plans in Middletown were unveiled.
At a groundbreaking ceremony in May, Kettering Health officials said they were developing an outpatient facility. The company later changed direction and asked the city to rezone the land for hospital use, saying the hospital network wanted a facility with 20 beds for short stays for patients. Kettering Health officials say they do not intend to build a full-service hospital.
Middletown’s planning board recommended at its Sept. 13 meeting that the rezoning request be denied; Premier officials attended the planning board meetings and urged the city to reject Kettering Health’s request. Middletown’s city council will take up the rezoning request on Tuesday, Oct. 17 and can grant approval despite its planning board’s recommendation.
“Anything that is an unnecessary duplication of services, … that’s going to harm your largest employer in Miami County and second largest employer in Middletown, it’s hard to see how that’s a growth strategy for those communities,” said Mike Maiberger, Premier executive vice president and chief operating officer.
Chew said Kettering Health officials were surprised by the reaction from Premier when they requested rezoning in Middletown.
“Our intention in going to these areas has nothing to do with competition or things of that nature. We are already serving patients in these communities. We’re simply attempting to bring our services closer to where people live,” he said.
In Troy, the new Kettering Health hospital announcement came at a ceremonial ground breaking in June. Mayor Michael Beamish said city officials had an inkling about what the project would be but learned the full plan for a hospital only at the ground breaking.
The new hospital will open near the city’s core and officials have said the influx of jobs and traffic for the facility will help with the city’s plans to grow its downtown.
“They have been great to work with,” said Beamish. “We can’t say enough about their willingness to be a part of our community.”
Both Kettering Health and Premier agree the future of hospital systems isn’t more new hospital beds, but it is outpatient centers.
This philosophy is in line with the trend happening across the U.S. The nation’s largest hospital systems are reporting declines in hospital-stays and are focusing their growth on adding smaller outpatient facilities.
As technology and medicine improves, procedures that might have once meant a multi-day hospital stay can now be performed as outpatient. And while outpatient procedures don’t draw in as much overall revenue, the procedures typically mean a higher profit margin.
The Wall Street Journal recently reported that giant U.S. hospital operators, including Tenet Healthcare Corp., Dignity Health and HCA Healthcare Inc., have all been heavily investing in urgent care clinics, free standing ERs and other types of smaller community locations.
The percent of all surgeries that are done on an outpatient basis has been increasing over the past 20 years, according to the American Hospital Association. The percent of hospital revenue tied to outpatient visits is also up. AHA data states there has been a sharp decline in the the number of inpatient admissions and average length of stay by patients.
Kettering Health’s Troy hospital will have inpatient beds, and services like an ER, lab and imaging, surgery center and a medical office building. The Middletown site will have a full ER, imaging, and a medical office for physician practices, including primary care, and pending approval there will be 20 short stay beds.
Health care growth
Kettering Health isn’t the only hospital system showing increased construction growth. Most of the systems that are part of the region’s $8 billion health care industry have recently invested in big renovations or new locations.
Premier Health is in the midst of a $60 million renovation of Miami Valley Hospital South in Centerville. It is also working with the University of Dayton on a joint redevelopment of the Montgomery County Fairgrounds across the street from its Miami Valley Hospital.
Dayton Children’s has also expanded with a new campus in Springboro and recently held a grand opening for its new $168 million patient tower at it’s Dayton campus on Valley Street.
Kettering Health also has purchased several other properties in the region, making further development possible. Those include an office building in the heart of Oakwood and a lot in downtown West Carrollton that now holds a defunct car wash.
When asked if the network had additional locations planned beyond the buildings and land sites that have been announced, Chew said the network is always interested in ways to work with communities to improve health care service.
Chew said the pace of Kettering Health’s development might be faster than 15 years ago, but the network has been continuously expanding for more than a decade starting with when the network built an ambulatory care site in Eaton.
Just in the past two years, Kettering Health projects include a $53 million cancer center in Kettering, $10 million emergency room facilities in both Franklin and Eaton and a $9 million medical office building in Springboro.
“I know it seems like we’ve been doing a lot recently but this has been a rather continuous effort on our part to get care and access closer to where people live,” he said.
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