Your Primer to Healthcare Mergers and Acquisitions

The Outpatient Way (Part I): 6 Factors Fueling The New Healthcare Revolution

Jul 5, 2016

by Tom Schramski

By Tom Schramski, PhD, CM&AA and Marc Toth, CM&AA 

Volume 3 Issue 14 July 5, 2016

The famous biologist, Charles Darwin, wrote after years of study that “it is not the strongest of the species that survives nor the most intelligent – it is the one that is most adaptable to change.”  There is no better example of this observation than the current evolution of healthcare into “the outpatient way”.

For more than a century, American healthcare has been focused on inpatient or hospital care as the most appropriate location for necessary medical interventions.  However, in the past decade this approach has come under assault.  According to Modern Healthcare, hospital admissions and inpatient days have declined steadily since 2008, with numerous small hospitals (< 60 beds) closing for economic reasons.  The national inpatient facility occupancy rate has fallen from 77% in 1980 to 64% in 2008 and 60% in 2013.

What’s fueling this change?  These are a few of the reasons:

  • The growing emergence of physician entrepreneurs:  For generations, the fate of a physician’s practice seemed logically bound to the success of local hospitals, but this is no longer the case.  Many physicians now look first to what services they can offer outside of the hospital before considering an alliance with a local inpatient facility.
  • “Sovereign consumerism” reigns:  As Monica Oss of Open Minds notes, today’s healthcare consumer is increasingly attentive to the value proposition of all products and services, and will favor outpatient interventions that offer accessibility with a patient-centric mindset.
  • The shifting economics of care:  More and more commercial insurance reimbursement policies are financially rewarding physicians who can offer treatment in outpatient settings, especially when such services and/or devices reduce the likelihood of hospital admission.
  • Innovation paves the way:  Rapid improvements in medical technology now permit sophisticated diagnoses and treatments in outpatient settings as diverse as urgent care centers and vascular OBLs. Many advanced medical interventions can now be performed in the physician’s office, some of which have come to look more like a comprehensive specialty clinic than ever before.
  • Good outcomes and less risk:  Not only do outpatient procedures in a variety of specialties have excellent outcomes, comparable to or better than hospitals, but they also have lower rates of infection in most cases.  As this fact is more effectively marketed, it will offer a powerful argument that, in some cases, hospitals can be bad for your health.
  • The end of hospital hegemony:  Inpatient facilities now seem to offer value only in the most dire of circumstances or where the most expensive and sophisticated medical equipment is required.  As innovation continues, this value will likely shrink further.

Harkening back to Charles Darwin’s quote, inpatient facilities often fit the metaphor of an aircraft carrier trying to make a turn: slow to make a correction, lacking in agility, and trying to catch up.  Hospitals will always exist, but they are now being forced to adapt at a time when a number of inter-related forces are driving healthcare into the outpatient way, which offers improved healthcare opportunities for customers and investors.

Tom Schramski

Tom Schramski PhD, CM&AA


Tom was the Founder and Managing Partner of VERTESS. He was a Certified Merger & Acquisition Advisor (CM&AA), consultant, and Licensed Psychologist with over 35 years of very successful national experience in the healthcare marketplace, including co-founding and building a $25 million behavioral health/disabilities services company. Tom represented sellers and investors across the healthcare spectrum and was recognized for his executive leadership in the 2005 Entrepreneur of the Year issue of Inc. Tom passed away in December 2018.

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