The Rise of Niche Medical Providers

Understanding New Roles and a Changing Delivery Ecosystem

By Staff Reporters

Join Our Mailing List 

It is well know that orthopedic and cardiac hospitals have experienced a development boom over the past decade.  And, according to Robert James Cimasi MHA, AVA, CMP™ of Health Capital Consultants, LLC, reimbursement levels for these specialties, and especially surgeries, have been considered to be relatively high in comparison to others, creating the perception that these services are especially profitable.

Reasons for Development

The reasons for specialty hospital development are complex and vary across markets but analysis suggests that three factors are important drivers of this trend nationally:

  • relatively high reimbursements for certain procedures;
  • physicians’ desire for greater control over management decisions affecting productivity; and ,
  • quality and specialists’ desire to increase their income in the face of reduced reimbursement for professional services.


From the perspectives of some observers, the possible “overpayment” for certain specialties’ services is unintentional on the part of payors and is possibly the result of recent productivity gains in those specialties.  The promoters of this reimbursement methodology have asserted,

The challenge for policy makers is to give specialty hospitals the chance to fulfill their promise as focused factories while limiting their opportunities to prosper from cream skimming and preventing problems for patients and communities such activity might cause.

From this singularly preconceived viewpoint, productivity gains through efficient provision of quality services should be discouraged and saddled with the disincentives of lower reimbursement to allow less efficient providers to compete.  That surgical and specialty hospitals focus on a narrower range of procedures and produce quality and efficiency gains over their general acute care hospital competitors is rarely disputed.  Existing hospitals often admit this but then claim that new market entrant hospitals dilute the experience level of their facilities, which then results in a lowering of quality.  This is part of the larger argument that any quality or financial gains made by the surgical or specialty hospitals are the direct result of losses at the general acute care hospitals.  If these hospitals can’t cost shift to subsidize less profitable areas such as emergency departments and intensive care units, the argument goes, then they will be in jeopardy of closing them.

Medical Professionals and ME-P Advisors


These proponents assert: “Policy makers seek to encourage competition and give new care delivery models that have the potential to improve quality and lower costs a chance.  However, they also want to maintain quality and patient safety, avoid total as well as per-case cost increases and preserve access to basic services.”


In response to the development of niche providers and specialty hospitals, general acute care hospitals often are competing by adding to their offerings in these specialties to create integrated specialty centers or even constructing new specialty hospitals themselves.  In many cases, hospitals seek physician involvement in these developments, through joint ventures or other means.

Channel Surfing the ME-P

Have you visited our other topic channels? Established to facilitate idea exchange and link our community together, the value of these topics is dependent upon your input. Please take a minute to visit. And, to prevent that annoying spam, we ask that you register. It is fast, free and secure.


Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact:


Product DetailsProduct DetailsProduct Details

Product Details  Product Details

   Product Details 


5 Responses

  1. The New Reality for Young Doctors

    One of the groups most affected by the changes in the new health law are medical school students. When they graduate – and complete the hospital residencies that follow – they will begin practice under a system that will be significantly different than when they began college. With millions more people expected to have health insurance, demand for primary care physicians is expected to go way up.

    And so, is this a new niche medical provider format? You decide.

    Ann Miller RN MHA



  2. The Fading Art of the Physical Examination
    [Or, Where did the real doctors go?]

    For centuries; doctors diagnosed illness using their own senses, by poking, prodding, looking, listening. From these observations, a skilled doctor can make amazingly accurate inferences about what ails the patient; but technology has changed that.

    “We’re now often doing expensive tests, where in the past a physical exam would have given you the same information,” says Jason Wasfy, a cardiologist-in-training at Massachusetts General Hospital in Boston.

    And so I must ask – whatever happened to Barbara Bates MD and her: Bates’ Guide to Physical Examination & History Taking? Turning over in her grave, I surmise.

    Dr. David E. Marcinko; MBA CMP™


  3. Optometry Now Part of Primary Care Under ACA

    After years of advocacy by the American Optometric Association for inclusion of optometry services in the definition of primary care – for the first time in history – vision care has been included in the definition of preventive and primary health care services under the Expanded Services initiative of the Patient Protection and Affordable Care Act [ACA].

    Enter the new PCPs; any thoughts?



  4. Niche Advisors, too

    Find a niche and position yourself within it. If you know a lot about one thing compared to a little about a lot of things, you will be more focused and most likely, more successful.



  5. New Markets

    These new markets entrants are likely to be a transitional phenomenon. In the short run, they are a way for health systems to gain experience in managing risk without fully diversifying into the health plan space. In the longer term, many (most?) will fail to gain market traction, or the health system partner will fail to manage care effectively, or the health plan will fail to operationally support a narrow product, any one of which will lead to the dissolution of the venture.

     A few will be very successful in the market, and lead to health systems internalizing health plan capabilities (e.g. Inova dissolving their Aetna partnership). A small number may grow into durable partnerships.

    The reality is that while joint ventures can be useful, they are hard to sustain. One partner or the other realizes that they are bringing more value to the relationship than the other. Or changes in corporate priorities and/or leadership alters one partners commitment to the relationship.

    Bill Eggbeer
    Managing Director-BDC Advisors
    [via Ann Miller RN MHA]


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: