Hospital competition and an aging population
Earlier this month, local hospital network TriStar Health announced a big expansion plan for its midtown campus, TriStar Centennial.
Included in the project is a $123.7 million plan to add four floors and a joint replacement center to the HCA Healthcare-owned hospital, expected to open early next year.
In announcing the project, TriStar representatives said the investments will allow the hospital network to meet the needs of the growing communities its hospitals serve.
Here are two other reasons the hospital network may be investing in orthopedics specifically, and hospital projects in general.
While Nashville’s population is growing, the majority of newcomers aren’t the primary targets for orthopedic care. Sports medicine is an important part of orthopedics, but volume growth in joint replacement surgeries is driven by older consumers, too.
According to the Population Reference Bureau, the number of Americans ages 65 and older is projected to more than double to over 98 million by 2060. This population shift is expected to dramatically reshape the health care system, especially in regards to elder and long-term care. But for now, the orthopedics market relies heavily on this trend, which has contributed to significant growth over the past few years.
In other words, TriStar’s communities are growing and often also aging. Hospitals are poised to take advantage of this trend by building out orthopedic and joint replacement service lines.
Of course, TriStar isn’t the only hospital in town to recognize these demographic changes. Vanderbilt Health has has offered a robust suite of orthopedic services for years across 10 locations, including children’s orthopedics and orthopedic trauma services.
The city’s other flagship hospitals have also been working on growing their orthopedics divisions. TriStar initially received state approval for the project in 2014, the same year Saint Thomas Midtown began construction on its $25 million joint replacement center.
In total, Nashville hospitals will have invested more than $150 million in new orthopedic services over the past few years. Even with an aging population, does Nashville have that many patients who need knee and hip replacements? Back in 2014, Saint Thomas didn’t think so — the hospital group opposed TriStar’s joint replacement plan, calling Nashville “over-bedded.”
Some think what’s actually driving these big investments is competition. If there are a limited number of orthopedic cases in the region, each hospital wants to be able to compete for these patients and gain leverage with insurers in the process.
This is a strategy TriStar has employed as related to pediatric emergency services as well. The hospital system recently opened The Children’s Hospital at TriStar Centennial, a direct competitor to Vanderbilt’s Monroe Carell Jr. Children’s Hospital.
Why would TriStar invest so much in these capital projects? Some would argue it is to better compete with Vanderbilt specifically, which has long held a firm hand on Nashville’s hospital market, especially as related to employer group health insurance.
When Nashville employers are picking an insurance plan for employees, most want to include Vanderbilt because of the hospital’s scope of services and quality of care. No employer wants to pick an insurance network that doesn’t include Vanderbilt in case an employee or employee’s child needs specialized care at that hospital.
This drives a lot of patients to Vanderbilt and gives Vanderbilt a lot of leverage when it comes to negotiating with insurers — more so than other hospitals in the region.
To drive more patients to TriStar and negotiate better reimbursement rates, it helps if TriStar can convince employers to choose insurance plans that don’t have Vanderbilt in-network. To do this, the hospital has to provide the same kind of health care services as Vanderbilt.
TriStar Health’s capital investments may be driven more by this dynamic than population or demographic changes.
How might consumers be affected?
Typically, health care competition is a good thing for consumers. TriStar’s investments may result in more options for consumers seeking orthopedic care and result in more options for employers choosing group benefits plans.
On the other hand, as hospitals become more competitive, they are often able to charge more from insurers and consumers. As a result, as Nashville’s hospitals grow, prices might follow suit.