Construction Report: Should we build it? And will they come? Lessons in pediatric satellite campus planning

By Sandy McElligott, MBA, RN, NE-BC, Senior Consultant for FKP Advisors

March 2016

Providing healthcare today is a tricky business. The ability to support the overall organizational strategy while simultaneously creating value for patients and the organization alike is an unfamiliar and untested business model for many hospitals. Factor in costly capital investment and healthcare organizations can become paralyzed trying to navigate forward.

Some hospitals have moved boldly ahead, making substantial capital investments in the form of satellite campuses. United under one name and level of service yet differing in community-centric ways, these additional locations have yielded great success for many hospital systems that recognize specific needs in their surrounding communities. The satellite campus strategy is relatively new in the pediatric marketplace; the changing healthcare landscape is shaping how providers plan, operate, and evaluate satellites.

Why a Satellite Campus
FKP Architects has assisted ten hospitals in various phases of satellite campus master planning, design, and development; the firm is currently working on a new satellite campus at Texas Children’s Hospital The Woodlands. Relying on completed projects and ongoing research, FKP has supported providers with satellite campus planning and making the critical decision about moving forward.

Common drivers that bring hospitals to the drawing board include:

• Responding to growing needs for expert pediatric care

• Providing convenient, accessible care closer to home

• Increasing market share

• Attracting the commercial payer mix

• Achieving cost efficiencies by consolidating existing community programs and services into a new facility

• Decanting main campus volume

• Capturing the opportunity for future expansion

Strategic Planning Considerations
The foundation of the planning process is determining the role of a satellite and its greater role within the organizational strategy. The broad considerations that should be addressed require the involvement of hospital administrators, medical staff, and board members to get a holistic view of how a satellite might function on Day 1, Day 1000, and beyond.

What leadership structure will be most effective – an extension of the original campus, the creation of a more corporate structure with “system” executive leaders and satellite campus executive leaders, full or partial matrix structure?

• What is the culture of the satellite campus to ensure success in the community—a new culture, transferred culture from the original campus, hybrid?

• What is the appropriate level of autonomy of the satellite campus?

• What level of patient acuity will be cared for at the satellite campus—low acuity, high acuity with intensive care, does the acuity increase over time?

• What will the provider model look like - pure private, pure academic, or a hybrid?

• If an academic institution—will learners be at the satellite campus?

• What are expectations of the satellite to contribute to system-wide growth?

• What metrics will demonstrate impact and value?

Getting into the satellite business
Bricks and mortar are expensive to build, operate and maintain. The equation becomes trickier when allocating funds between multiple locations united under one name and striving to maintain profitability. What are the financial considerations?

• Overhead allocation – will it be shared or maintained individually?

• Dean’s Tax allocation for academic institutions

• Staff salaries – how will the satellite salaries compare to those of the original campus, factoring in items such as varied commutes and quality of life?

• Cost Model – must it be consistent between campuses, especially if patient classifications are different?

• What is the payer mix – commercial vs. Medicaid and Medicaid managed care?

• Contribution margin – will it be calculated with direct patient care revenue and expenses individually?

• Space availability – will open space be leased to community providers?

• What services could be outsourced – food services, environmental services?

• What support services should be developed within a system provider mindset?

Managing to the margin holds true for both the original campus and satellite campus – if one facility is doing well and the other is not, everyone needs to help “the system.”

Operationalization is the initial strategic planning put into motion. From scaling capacity and services to addressing cultural differences between campuses, maintaining a clear view of the satellite campus role has guided hospitals through the opening and eventual growth.

• Dedicated providers increase referring physician satisfaction and thus faster growth

• Census fluctuation due to seasonality is challenging; adding programs with less seasonality eases staffing issues

• Cross training of all segments of staff is advisable

• Adding ICU beds increases activity levels hospital wide

• Organizations are using the same charge master and salary structure as the original campus

• Some level of autonomy is needed to manage satellite successfully

• Satellite becomes an easier place to test system change and other process improvement initiatives

• Family space needs may possibly be less than at original campus

• Satellites are providing very limited learner opportunities

• Operate surgery services as “Ambulatory Surgery Center” model

• Urgent Care billing model is confusing for providers and families

Lessons Learned
When put through the paces of census volatility, staffing considerations, and ultimately, patient needs, satellite campuses have demonstrated success. While each is as unique as the community it serves, several common themes emerged upon completion and occupancy of various satellite locations.

• Vision and Scope: Stay focused and develop a process to change course

• Physician Engagement: Be creative in engaging private physicians

• Activity and Growth: Timing of opening and seasonality may affect volume trends. Strategically place sufficient shell space for future growth

• Leadership: Determine if matrix management structure is right for the organization and if the leadership has the skills to be successful in such a structure. Lower acuity does not mean less complexity—leaders must be proactive, resourceful and creative

The Future
It is not a question whether healthcare will continue to evolve, it’s a matter of timing and magnitude. Providers must remain nimble. Top children’s hospital providers are always looking to the future. Some initiatives on the horizon include:

• Expanding scope and complexity of services

• Increasing number of “dedicated” providers

• Growing programs

• Planning and design of a second satellite campus

• Understanding operational efficiencies and facility costs compared to the original campus setting

Providing care at a satellite campus creates value for the patient AND the organization through increased access and enhanced patient experience, all while benefiting the bottom line. Organizations that rethink how they deliver health care will certainly position themselves more strongly for the future.