Out the window of Northwell Health’s New Hyde Park, New York, offices sits an expansive 1.4-million-square-foot building.
Decades ago, the government used the building to manufacture airplane parts during World War II, and it later served as a manufacturing facility.
Northwell Health, New York’s largest health system by revenue, began leasing the space in 2004, and today, it serves a much different purpose. Inside sit health centers run by Northwell, including a cancer center, radiology, lab-testing, urology, and neurology.
They’re services you might typically picture being offered within the four walls of a hospital, alongside operating rooms, an intensive care unit, and beds where you can get care overnight. But increasingly, that’s no longer the case.
“Everything that’s over there was in a hospital not that many years ago,” Northwell CEO Michael Dowling told Business Insider.
Healthcare is moving out of hospitals
Nationally, more and more of healthcare is being provided outside of hospitals. According to an American Hospital Association report cited by Modern Healthcare, hospital systems generated $472 billion in revenue from outpatient care in 2017 and $498 billion from inpatient care.
There are a few main reasons for the shift, according to Dr. Lisa Bielamowicz, the president of Gist Healthcare, which consults with health systems, told Business Insider. For instance, health systems are buying up doctors’ practices and businesses that already was outside of the hospital business. At the same time the way health systems get paid is changing, as well as patients’ preferences for where they want to get care.
“The majority of big health systems now get 50% or more from the outpatient or ambulatory space,” Bielamowicz said.
Northwell Health began as an operator of hospitals. And it’s now approaching that milestone. Soon, less than half of the health system’s revenue will come from its hospitals, down from 80% a decade ago.
Northwell operates 23 hospitals and 750 other healthcare sites like clinics, urgent care centers, and imaging centers. The health system made $11.5 billion in revenue in 2018. Dowling’s been watching the business of hospitals shift over the past few decades since joining Northwell in 1995 and becoming CEO in 2002.
As more and more care moves out of the four walls of the hospital, he’s had the health system adapt by cutting down beds in some cases, building out new revenue-driving wings in community hospitals focused on specialties like orthopedics and laproscopic surgery, and beefing up the health system’s ability to care for very sick patients in its academic hospitals.
The changing footprint of the hospital
Northwell’s also had to rethink what to do with the space that get left behind. In some cases, the health system has decided to shrink or close hospitals. One hospital went from 300 beds to 60.
But at the locations where Northwell treats the sickest patients, there’s still plans to grow.
“Hospitals are going to become intensive-care places,” Dowling said.
Bielamowicz said hospitals, like the US at large, are facing a significant demographic shift: their customers are aging. For the hospitals, that means more of their business is going to be derived from government-funded programs such as Medicare, which provides health coverage for those 65 and over.
Medicare typically pays hospitals less than private health insurance plans provided by big employers. That means it’s going to be difficult for hospitals to maintain the model they have today, in which they’re full of very sick patients alongside patients who have been readmitted with a chronic condition that could be managed elsewhere.
“I have to think about, how do I get low-margin cases out of the hospital?” Bielamowicz said.
She said she’s been pushing her clients to think about operating a senior care businesses, which could manage those chronically ill elderly patients, freeing up room in the hospital for surgeries on patients who have commercial insurance plans in which the reimbursement is higher.
Northwell is pursuing a similar strategy. Business Insider took a tour of one of Northwell’s North Shore University Hospital in Manhasset New York, which houses one of Northwell’s main heart programs and a transplant center.
Inside the hospital’s main tower, rooms for patients just getting out of the operating room after heart surgeries or transplants are crammed with equipment, leaving little room for loved ones or doctors.
Upstairs, the hospital’s just opened an intensive care wing. On that floor, the rooms are bigger, built to be single-patient rooms with more room for family and machinery.
“These big academic medical centers are going to be huge facilities filled with the absolute sickest patients.”David Brody, vice president of cardiovascular and thoracic surgery, told Business Insider.
Reformatting a community hospital with a bad reputation
Decisions about what to do with existing footprints vary hospital by hospital.
“You decide to focus on what the consumer is looking for,” Dowling said.
Employees and unions might not be happy with moving outside the hospital at first, but eventually they come around, Dowling said.
In the case of Northwell Health’s Long Island Jewish Valley Stream, a community hospital in Valley Stream, New York, that meant converting a psychiatric-care wing into a high-end orthopedic wing for patients coming out of joint surgeries. Instead of operating a separate psychiatric wing, the hospital moved its patients and care teams into nearby Zucker Hillside Hospital, a behavioral health center.
The decision came as the community hospital — like others that Northwell has added specialty programs to — was struggling financially.
Northwell mulled over a lot of options, like expanding the intensive care unit for the hospital. Ultimately, with a partnership with Orlin & Cohen Orthopedic Group, a specialist medical group that’s affiliated with Northwell, the health system landed on orthopedics.
The new wing stands to be a more lucrative business than the psychiatric wing. Orthopedic surgeons, for instance, are the third-highest paid specialty in medicine, while doctors practicing psychiatry make roughly half that.
And concentrating Northwell’s psychiatry practice to one hospital is one way Bielamowicz said health systems can make the most of the acquisitions they’ve made over the years. The healty system acquired what’s now known as Valley Stream in 2002.
Where the old psychiatric wing once stood are now patient recovery rooms featuring larger-than usual doors to accommodate walkers. Each room is fitted with a bathroom that also has a larger door. The hallways are carpeted to allow for traction.
“It’s not enough for a patient to come to a hospital and get medically cared for,” said Dr. Joseph Marino, the chief medical officer at Valley Stream. “Every other aspect of their hospital stay needs to be enhanced.”
There were a few reasons behind putting an orthopedic specialty center in a community hospital. For one, it’d help bolster the reputation of the hospital that even with a name change still didn’t have a good reputation.
“When I got here it didn’t have a good reputation,” Jason Tan, director of hospital operations at Northwell Health’s Long Island Jewish Valley Stream. “We slowly tried to build confidence within the community, the FDNY, local ambulances.”
On the other side of the hospital, Valley Stream has been renovating its emergency room, growing it from 25,000 visits in a year when the hospital was built to 40,000 today. It’s expanding to take care of 55,000 patients a year.
Hospitals are facing more competition for patients
The shift in what’s happening within and beyond the four walls of the hospital is happening at a time when hospitals are getting more competitive to win patients, competing not only with other hospitals but also newer entrants like retail pharmacies, urgent care centers, health insurers, and even technology upstarts.
Northwell will soon get less than half of its revenue from hospitals.. As that happens, Dowling’s going to need to make even more changes to the way he operates the health system.
“Hospitals are changing, they have changed, they’ll change more,” Dowling said.
- Read more:
- Hospitals are getting more competitive to win patients. Here’s how one of NYC’s largest health systems is building new tech to stay relevant.
- The $23 billion health system in Amazon’s backyard just started a company to help hospitals avoid ‘landmines’ when they try to act like health insurers
- CVS Health just gave a 174-slide presentation on the future of the company. Here are 8 crucial slides that show how it plans to transform the way Americans get healthcare.
- Health insurance startups like Bright and Oscar have raked in $3 billion in venture funding. They’re using that war chest to plot out massive expansions across the US.