5 Keys to Successful Hospital Expansion

5 Keys to Successful Hospital Expansion

Expertly Navigate the Complexity of New Site Placements 

By Morgan Atkins

A complex process that requires financial scrutiny and thorough planning, new site placements are an opportunity to extend service offerings, create new jobs for the community, and improve your hospital’s bottom line. But the fiscal commitment tied to expansion can give many leaders pause. Is it possible to be sure that your new placement is in the right location and that it will effectively meet the needs of the community? How can you be certain it will succeed? In this post, we’ll give you the tools you need to answer these questions and expand your health system with confidence.

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5 Keys to Successful Expansion

1. Define Your Goals

As with most planning processes, it’s helpful to start by outlining your goals. Are your goals to find markets similar to the ones where you are currently successful and start the process toward repeating success? Or are you looking to tap into new markets you’ve yet to reach? 

Determining your goals will help you track and measure success along the way. These goals can give you a point of reference to follow as you develop your plan and will guide your scoring mechanism, something we’ll discuss more in step five.

 

2. Understand Your Current Market

As you look to expand, it can be helpful to first account for your current market. Here is a list of considerations to investigate:

  • What are the demographics of your current patients?
  • What distance do patients travel to reach your current facilities?
  • How does your competition impact your current strategy?
  • Between your high performers and low performers, what are the differences between the market landscapes?
  • What are the non-qualitative factors affecting performance? Consider things such as poor marketing, staffing issues, and visibility.
  • Which factors are strongly influencing your performance?
  • Which factors are favorable, but may not influence performance?

Answers to these questions will help you see how and why you are successful (or not) in your current placements. This process can also guide you in how to approach your new ventures.

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3. Scan the Market of Interest

Below are two good options for scanning your market:

  1. Scan by geography (county or ZIP code): 
    • ZIP codes vary widely in size and demographics and creating a scoring mechanism based on ZIP codes often favors the more populated areas. Conversely, counties are more uniform in size and can be appropriate to use when scanning multiple states.
    • You should scan your market of interest by geography if the type of site you’re wanting to place is less sensitive to its immediate surroundings. For certain sites of care, such as pain clinics, patients are accustomed to traveling further distances. In these cases, finding ideal sites based on an entire county may be appropriate. Urgent cares, however, are highly reliant on the dynamics of their local markets and typically draw patients from within a 5-mile radius. Scanning counties for an urgent care may cause highly valuable pockets within to be overlooked.
  2. Plot points throughout the market and compare by radius:
    • This approach puts all sites ranked on the same playing field—no site will be artificially favored due to simply having more square miles.
    • This approach is preferred when the performance of a site is largely influenced by a smaller radius.
    • Be cautious of comparing sites at too large of a radius. A 10 or 15-mile radius can be centered around a small town, but may capture portions of a nearby metropolitan area. This will cause instability in the comparisons across sites.

 

4. Collect an Accurate Dataset of the Competition

Competition is one of the largest influences on performance, so it’s critical to ensure this step is done thoroughly. An accurate competitor dataset will prevent your team from spending unnecessary time and resources on a site that seemed ideal, only to find out further along that it is not a feasible site due to pre-existing competition.

 

5. Select Variables to Score the Sites of Interest

The final step to landing the ideal new site placement is to determine how you want to score each of your sites of interest. For a more in-depth discussion on this step in the process, schedule a discovery call with one of Stratasan’s in-house experts. For the purposes of this post, I’ll share a high-level look at Stratasan’s scoring methodology:

  • Create ranges for scoring for each variable
  • Give heavier scoring to factors that strongly influence performance
  • Give negative points if certain thresholds are not met
    • Note, not all variables have to have a positive and negative score
  • Don't always assign points in the method of "higher is better;" be careful to not inadvertently favor sites with a higher population, for example.  
  • Look at your current market and understand the ceilings. The BIGGEST mistake we see healthcare providers make is being blinded by higher income and ignoring the fact that the population is low or that the market is already saturated by competition.
    • Higher income areas are healthier and utilize healthcare less. While they are commercially insured, we've actually found that some healthcare providers to show a negative correlation between income and profitability.
    • Low- to mid-income areas (with a median household income over $35k) are often under-served and have little competition. Don’t take this for granted, as they will likely be more willing to utilize your services!

 

The Takeaway

In summary, you don't have to be a statistician to be able to weigh opportunities. You just have to come up with a defensible logic that supports your strategy. This objective, step-by-step process is a helpful way to navigate your expansion research and weigh the pros and cons of each potential new site placement. For more information on how Stratasan can help you determine the ideal location for your next expansion endeavor, contact us and schedule a discovery call today.

Article by Morgan Atkins, Director of Innovation at Stratasan

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