Metro Atlanta health systems may widen their horizons

 

When a retailer opens a new store in a thriving neighborhood, it’s no surprise if a competitor sets up shop nearby. They go where the business is.

That has not usually been the case with the metro Atlanta hospital industry and its large health systems — Piedmont Healthcare, WellStar Health System, Emory Healthcare and Northside Hospital. Wherever one has staked out its turf, the others have mostly stayed away. 

But the geographic monopolies that help define local health care delivery could change in the near future, especially if expansion beyond a traditional home base offers a health system the chance to gain market share, industry analysts and health system executives say.

The impact on consumers is uncertain, apart from the prospect of people having a greater variety of medical services available closer to where they live.

But the inevitability of ever-expanding health care systems seems likely, driven by several factors.

One is the growing financial pressure on smaller, independent hospitals in metro Atlanta, which industry analysts say could be swallowed by larger, financially stronger multi-hospital systems.

“Twenty years ago there were more smaller hospitals that didn’t command geography beyond their immediate footprint,” said Ron Vance, Atlanta-based managing director of Navigant Consulting.

Another is the need for those larger players to expand in order to increase business efficiency and provide the better care and patient value demanded under health reform.

“We have seen a lot of consolidation in the hospital field just in the last five or six years, and I think that trend is going to accelerate exponentially,” said Kevin Bloye, a vice president with the Georgia Hospital Association.

For now, three of the four major health systems in metro Atlanta have relatively well-defined territories where they operate and even dominate:

  • WellStar is the primary provider in the northwestern suburbs.
  • Northside, true to its name, has developed to the north from its hub at I-285 and Ga. 400.
  • Piedmont has its high-profile campus in the heart of Atlanta, but it has grown into a major presence across the south side of the metro area with hospitals in Fayette and Henry counties and Newnan.

Emory is the exception. While known for its locations on the Emory University campus east of Atlanta and for its Midtown hospital, it also sprawls into Johns Creek to the north, Tucker further to the east, Smyrna to the north and west and, thanks to its partnership with Emory St. Joseph, to the top end of the Perimeter.

“This market has tended to gel in geographic swaths,” Emory Healthcare President and CEO John Fox said while noting his system looks to serve “the entire metroplex.”

Metro Atlanta also is home to other hospitals and health systems not owned by the four largest providers, among them Grady Memorial Hospital in Atlanta, DeKalb Medical, Gwinnett Medical Center and Atlanta Medical Center.

Health systems would prefer to grow in affluent areas where more patients have private medical insurance. Patients with insurance, whether employer-provided or privately purchased, are crucial because hospitals are more likely to get paid for the services they provide, helping to offset the cost of patients who can’t or don’t pay.

The Center for Studying Health System Change, in a 2012 examination of a dozen markets, not including Atlanta, found that hospitals are targeting areas that have well-insured customers.

One such area is metro Atlanta’s northwestern suburbs. Reynold Jennings, CEO of WellStar, that area’s main provider, noted in an AJC interview two years ago that, “The landscape is going to get very competitive, particularly from Piedmont and Northside hospitals, which will become aggressive in coming up to our territory.”

WellStar and Northside are currently in dispute over a WellStar subsidiary’s request for a Certificate of Need (CON) to build an outpatient surgical center in East Cobb. Northside opposed granting the request, leading to an ongoing court battle.

The CON program, administered by a division of the Georgia Department of Community Health, evaluates proposals for new or expanded health care services or facilities. It aims to ensure the availability of adequate health care services while preventing unnecessary duplication.

The only general hospital built from scratch in Georgia in the last decade, according to the Georgia Department of Community Health, is the DeKalb Medical Center at Hillandale, which opened in 2005.

If not for the CON process, large health systems might converge on more desirable areas, health care executives said.

“Everyone might be in Johns Creek if they could be,” said Emory’s Fox, whose system has a hospital in that suburb.

Health systems don’t have to acquire other hospitals or build their own to grow. They can also buy private physician practices.

Adding a primary care practice, for example, can bring a large and loyal patient base to a health system. And once inside, those customers are likely to use the many other services offered, from MRIs to hospitalization.

“They can establish a beachhead with primary care physicians and with some key specialists, and this becomes the foundation to which you add imaging and other outpatient services,” said Dan Beall, a partner with the Strategy House, a health care strategic planning company. “It’s a good way to expand or cement a brand.”

Growing this way also allows the health system to bypass the CON review.

Ultimately, said Emory’s Fox, as the quality of care provided by health systems becomes more transparent, patients will focus more on a provider’s reputation and less on its location.

“If the locally dominant player for your condition looks like it’s just middle of the pack, and there are one or two very strong players who are an extra 5 or 10 miles away, that distance will melt away.”


 

When a retailer opens a new store in a thriving neighborhood, it’s no surprise if a competitor sets up shop nearby. They go where the business is.

That has not usually been the case with the metro Atlanta hospital industry and its large health systems — Piedmont Healthcare, WellStar Health System, Emory Healthcare and Northside Hospital. Wherever one has staked out its turf, the others have mostly stayed away. 

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