Hospital Muscle Remains Strong

Last Updated Jul 20, 2009 5:25 PM EDT

Wonder what sectors of the economy are still growing? An article in The Sunday New York Times provides the answer: Of the 10 areas that are growing at an annual rate of more than 3 percent, six are in health care. Hospitals, for example, are expanding at a nice 3.4 percent clip.

One reason is that healthcare systems are continuing to add new facilities in areas where the population is increasing. One example that caught my eye is the Inova Health System in northern Virginia, which has won local approval and is now seeking a state certificate of need to build a new hospital on Rt. 50 in Loudoun County, VA. The 80-bed hospital will include an ER, 10 critical care beds, MRI and CT scanners, and a heliport. Inova hopes to begin construction in nine months to a year.

Inova's application for a certificate of need is the latest chapter in a long-running battle with HCA, which has been seeking to build a new hospital a few miles away in Broadlands, five miles from Inova's facility in Reston, VA. The county Board of Supervisors twice turned down HCA's request, and the big hospital chain, in a suit it filed against the board, claimed that Inova was machinating behind the scenes.

Inova says that the main reason for building its hospital is to provide quicker access to acute and emergency services for people who live in the southern part of the county. But the new hospital would only reduce their driving time to the nearest hospital from half an hour to 20 minutes. Could there be another agenda behind the desire of Inova and HCA to erect a hospital in that vicinity? And if a hospital does get built, what will be the impact on local healthcare costs?

Meanwhile, many rural hospitals are having a hard time, with less access to capital than they had before the recession. But that doesn't mean that there aren't potential buyers for them. A new company based in the Nashville area, RegionalCare Hospital Partners, is on the prowl for facilities in smaller markets. Led by veteran hospital executives Marty Rash and John M. Rutledge, RegionalCare has up to $300 million in venture capital available from Warburg Pincus for acquisitions. And the company faces stiff competition from established operators like LifePoint and Capella Healthcare.

Why would RegionalCare want these faltering rural hospitals, which serve a preponderance of Medicaid and uninsured patients? There are at least two possible reasons: First, many of the grassroots hospitals are sole providers in their communities, meaning that they could get better terms for their privately insured patients if they bargained harder. Second, if healthcare reform results in a big increase in Medicaid coverage, as the Congressional bills propose, rural hospitals stand to benefit.

So, as they say in the capital of country music, "there's gold in dem dar hills."

  • Ken Terry

    Ken Terry, a former senior editor at Medical Economics Magazine, is the author of the book Rx For Health Care Reform.