Case Study: Orthopedic Practice Expansion

CLIENT:

Multispecialty Practice CASE STUDY

Midwest, USA

Leveraging a data-driven approach to site analysis, Array determined how and where the client could expand their practice to achieve sustainable growth

CHALLENGE

CLIENT PROFILE

One of the largest cities in the midwest is home to multiple competing

Midwest, US

health systems. The orthopedics market is equally competitive. With the

The client is a large, independent,

lease of their primary location coming to an end in 2022, a well-

multispecialty practice based in

respected developer and large multispecialty physician practice engaged

the midwest. With nearly 200

Array Advisors to determine how and where to expand their orthopedic

providers covering more than

services. Array assessed the client's outpatient clinic space and helped

30 specialties, their orthopedics

the client consider adding a freestanding orthopedic ambulatory surgery

service includes seven surgeons

center (ASC).

and six advanced practice providers. Their specialties include

SOLUTION Strategically place new orthopedic specialty offices or “front doors,” alongside the client’s primary care physicians (PCPs) in high growth markets in the nearby metro-areas. Ensuring appropriate utilization of their current ASC would allow for more efficient operations, increased capacity and opportunity for outpatient total joint growth.

SUMMARY The developer and healthcare client engaged Array Advisors to provide recommendations on the building of a new office space and ASC for the client’s orthopedics group. Due to move out of their current space in 2022, they were seeking advice on whether it is best for long-term growth to stay in their current location, which is close to both their current ASC and the hospital in which they operate, or if a better competitive strategy is to relocate to the more cosmopolitan community 20 minutes east.

Reportedly at capacity, additional questions arose regarding feasibility of creating an orthopedic specialty surgery center.

sports medicine, hand surgery and foot and ankle surgery.

CLINIC SITE EXPANSION - REGIONAL ANALYSIS The Array consulting team began with a detailed analysis of traffic patterns, population density, projected population growth and market share. These tools allowed them to see that both sites in consideration, when evaluating a 30-minute drive time, were surprisingly similar (Fig. 1, 2). More commercial insurance saturation in the second site’s market did give it a slight edge over site one. Other areas of high population growth were also noted, particularly a northern suburb where growth of the 65+ age group was strongest (see figure 3).

Site One Site Campus One Campus Key Demographics Key Demographics

Site Two Site Two Key Demographics Key Demographics

Total Population Total Population (2019)3: (2019)383,542 : 83,542 37.2

Median Median Age3: Age3:

3: Median Median Household Household Income3Income : $67K

$67K

3: Median Median Household Household Income3Income : $62K

$62K

10-Year10-Year Projected Projected Growth3Growth : 4%3:

4%

10-Year10-Year Projected Projected Growth3Growth : 4%3:

4%

3: 10-Year10-Year Projected Projected Income3Income : $77K

$77K

3: 10-Year10-Year Projected Projected Income3Income : $72K

$72K

Median Median Age3: Age3:

37.2

3: Total Population Total Population (2019)3: (2019)80,570 80,570

4: Payer Mix Payer Mix4:

38% 31% 14% 11% 6%

31.8

31.8

4: Payer Mix Payer Mix4:

Medicare 38% Medicare Private 31% Insurance Private Insurance Medicaid 14% Medicaid Self 11% PaySelf Pay Other 6% Other

50% 26% 6% 5% 12%

Figure 1: Demographics, site one 30 min drive-time

Private 50% Insurance Private Insurance Medicare 26% Medicare Medicaid 6% Medicaid Self 5%PaySelf Pay Other 12% Other

Figure 2: Demographics, site two 30 min drive-time 1.

2.

3.

4.

Source: Array 1. Analytics’ Source: Pivotal Array Analytics’ Drive Time Pivotal Catchment Drive Time Calculator, Catchment 2020..Calculator, 2020..

Source: Placer.ai, 2. Source: Drive Trends, Placer.ai, Feb Drive 2020.

Trends, Feb 2020.

Source: Advisory 3. Source: Board Demographic Advisory Board Profiler, Demographic 2019. Profiler, 2019.

Source: Optum 4. Crimson Source: Optum Market Crimson Advantage Market Reports, Advantage Physician Reports, Payer Analysis, PhysicianMarch Payer Analysis, 2019 – Feb March 2020.2019 – Feb 2020.

Neither site seems well-positioned to capture anticipated growth to the north, and both could serve new patients to the south Total Population Growth by Zip1 vs. Proposed Sites

Over 65+ Population Growth by Zip1 vs. Proposed Sites

Projected Net Growth of Total Population from 2018-2028, n =68,286

Projected Net Growth of Senior (Age 65+) Population from 2018-2028, n=26,475

Total Population Delta 2018-2028

Site One

Site Two

30-minute catchment area based on travel time

30-minute catchment area based on travel time

10 mi

65+ Population Delta 2018-2028

110

53

9888

3050

Site One

Site Two

30-minute catchment area based on travel time

30-minute catchment area based on travel time

Summary: Site Two is slightly better for the over 65 growth.

Figure 3: Population growth, with consideration of 30 minute drive-time catchment area.

Page 2 | Case Study

10 mi

Analysis of orthopedic market share in the area and surrounding counties demonstrated significant competition in the region, and capturing PCP referrals proved critical in this market. While the vast majority of PCPs are aligned with area health systems, independent primary care physicians make up 17% of the market and present an opportunity for future patient capture (Figure 4). Additionally, interviews confirmed what the team suspected: patients prioritize local access to clinics, imaging and physical therapy, and often rely on their PCPs for surgeon recommendations. At present, site two was slightly better located for independent PCPs than the proposed site one location.

Referral dynamics: Primary care market mostly aligned to health systems Based on physician headcounts, the market is much more consolidated around the health systems

PCP Market Share1 At least 60% of the metro market is probably out of play for the client’s orthopods in the long term

Number of PCPs by Practice, n = 184, Greater Area Market, March 2019 – Feb 2020

Competitor 1

Note: Given the client’s approximately 80K unique patients managed, its market share of physicians and patients is fairly equivalent to its 10% of the service region's (800K) people.

17%

Competitor 2

33% 8%

Competitor 3

13%

The Client

19%

10%

Competitor 4 Competitor 5

The area’s primary care and orthopedic market share are similar, but is that enough scale to feed the orthopedic practice?

With 4 major “independent” groups, dominating any submarket not likely Orthopedic Surgery Market Share by Practice1 Total IP and OP Orthopedic Surgery Volume2, n = 8,951, Greater Area Market, May 2019 – April 2020 Competitor 6

9% 11%

3% Competitor 1

29%

The Client Competitor 7

12% Competitor 8

13%

Competitor 5

23%

Other

Summary: Opportunity to gain share is limited given level of consolidation in the market

Figure 4: Primary Care Market Share Page 3 | Case Study

1.

2.

Source: Optum Crimson Market Advantage – Attending Activity Data, May 2019 – April 2020.

Includes the following sub-service lines: Body Injuries, Foot, Hand, Joint Replacement, Medical Trauma (Orthopedics), Other Surgical Orthopedics, Sports Medicine, Surgical Trauma (Orthopedics). Limited to cases performed by orthopedic surgeons and hand surgeons. Excludes: Fracture/Dislocation Treatment, General Medical Orthopedics, and General Surgical Orthopedics.

AMBULATORY SURGERY CENTER The Array team next performed an in-depth analysis of the ambulatory surgery center. The ASC is a multispecialty facility with roughly 10,500 cases annually, 2,200 of which are orthopedic. The client’s orthopedics department is actively growing their outpatient total joint service, which by our analysis could add 250+ cases per year to the ASC as the program grows over the next five years. At present, the ASC is reportedly near capacity. Array identified areas where current productivity metrics lagged national standards, outlined key performance indicators and recommended a deep dive into the operations of the ASC to improve efficiency (Figure 5). In addition, the Array team suspects that a percentage of current cases could be moved to procedure rooms, creating much needed surgical space without undertaking the expense of building and running a new ASC.

ASC Operations Performance Indicators1

Keys to Success

• Block time utilization: 70-90%2

• Ensure appropriate patient selection for rapid recovery

• Turnaround time: 6 to 10 minutes* *(dependent on case mix)

• Orthopedic team members (nurses, techs, APPs) are highly skilled in all cases

• Cases/room per day: 3-8

• Two rooms for busy orthopedic surgeons

• Cases/room per year (orthopedic): 750-850

• Minimized variability in supplies, implants, and equipment to decrease costs

• Same-day cancellation

<1%3

• Keep local cases in procedure room to maximize OR availability

Summary: Before building a new ASC, there are many potential operational improvements that can be made to maximize capacity in the existing ASC Figure 5: ASC KPIs

FINDINGS Array Advisors recommended that the client focuses on creating multiple new “front doors” around their metropolitan area. Collocating with their PCPs allows for alignment, convenience and better long-term branding opportunities. The client would benefit from building the “one-stop shop” in multiple communities, positioning themselves with or near imaging and physical therapy services. Where the second site location was slightly closer to independent PCPs and therefore better positioned for referral, the payor mix in the site one community and the over-65 population growth of surrounding areas led Array to recommend that long-term strategic planning include growth at that location as well.

Array recommended that the client perform additional analysis of operating room efficiency and cases being performed at their current ASC. Given the expense of building and running a surgery center, we recommended against a new facility at this time in favor of efforts to maximize capacity at the current facility.

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Published: May 2021