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How Hospitals Compete: Turf War in Chicago

The University of Chicago Medical Center, whose South Side location in that city exposes it to what administrators undoubtedly feel are more than their share of indigent and uninsured patients, aims to move upscale by invading the turf of its much better positioned rival Northwestern Memorial Hospital.

According to the Chicago Tribune, U of C now plans to open an affiliated physicians' office at 150 E. Huron, just off the ritzy North Michigan Ave. shopping strip near Navy Pier. As you can see by zooming into the following map, it's also just a block or so away from Northwestern Memorial:

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The reasoning is simple: Wealthy and well-insured patients are good for a hospital's bottom line. But there are fewer of them around all the time, which leaves hospitals scrambling to win their "business" in yet another one of the unproductive, zero-sum competitions that litter the industry. That's why you so often see hospitals advertising their CT-scanner or cancer-care facilities -- insurance and Medicare reimbursements are relatively generous for such services, and so building them up is a keystone to successful hospital strategy, even if it means trying to poach patients from another well-heeled rival.

Plans for the new U. of C. facility aren't entirely clear yet, although the Tribune cites an unidentified source saying the office will offer cardiology services, which of course means more doctors who can refer downtown workers and shoppers to the U. of C. hospital. Northwestern, oddly enough, has also recently made a big push in heart services.

It's also worth noting that efforts to glom onto wealthy patients don't always work out. The Tribune reports that U. of C. used to maintain a similar satellite office just across the Chicago River, but shuttered the money-losing venture in the late 1990s.

(Hat tip: WSJ Health Blog.)

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