It's more than a clinic but not quite a hospital

Leaders of Wheaton Franciscan, an Illinois-based nonprofit health care system with 17 hospitals, said the idea for its newest facility stemmed from lessons learned when one of its subsidiaries, Covenant Healthcare, built an outpatient facility in a western Milwaukee suburb a few years ago.

"We learned from building that there was an unmet need for those patients who need to stay longer than just four hours," said Roberta Johnson, who is managing the new project for Wheaton. "And physicians were asking us, 'Can't people stay over night?' "

So Wheaton Franciscan recently announced plans to build an $80 million facility in the southwest Milwaukee suburb of Franklin, Wis., that upon its November 2007 opening will be primarily focused on outpatient care. And it also will have about 16 licensed beds for overnight stays and an emergency department open 24 hours a day. Though licensed as a hospital, the facility will not have an intensive care unit.

Consultants and other industry experts say the Wisconsin project is representative of a new crossbreed of health care facility that is emerging as more health care services migrate to an outpatient setting and as hospitals and health systems look for alternative strategies to address their own business and financial pressures.

"There are no more rules for what a medical facility for a community should look like or what services it should have," said Rick Wade, spokesman for the American Hospital Assn.

Johnson said residents around the area of the planned Wisconsin facility expressed a desire for outpatient services but also wanted an ED. The nearest hospital is 10 miles away, but building a full acute-care hospital was considered too expensive for the return on investment it might receive.

Instead, the health system chose a site and a building plan that would allow for expansion in the future, if deemed necessary.

Wade said hospitals and health systems across the country are creating hybrid facilities with just that option in mind. They are testing to see if a specific market could sustain a full-service hospital by building these smaller, less-expensive facilities first.

Some critics have questioned whether the hybrid facilities provide a means for hospitals to develop only the most lucrative procedures while ignoring unprofitable service lines.

But Ken Buser, president and chief executive of the Wheaton Franciscan subsidiary All Saints Healthcare, said that if the new facility is financially successful, it could help subsidize the larger system, which provides a full range of service lines.

Since plans for the facility were announced in December 2005, Johnson said at least seven other health systems have made inquiries about the project, seeking information as they consider similar facilities.

"It sounds to me that folks are struggling with the same thing across the country," she said.

Though no figures are available about how many hybrid facilities have been built, anecdotal evidence suggests they are cropping up in different forms, such as clinic and hospital combinations, research institutions with inpatient beds, or specialty hospitals with emergency departments and multiple lines of service.

Consultants and industry experts say these facilities are a byproduct of the emergence in recent years of other facilities such as ambulatory surgery centers, specialty hospitals and freestanding emergency departments.

Jacque Sokolov, MD, chair of Scottsdale, Ariz.-based consultant SSB Solutions, said there is not a lot of physician investment in the hybrid facilities. "In general, there is so much complexity around physician investment in inpatient facilities that the effort required to bring in physician investors usually is a disincentive for the hospital to do that."

But he said physicians working in these facilities might get the opportunity to do a joint venture for some of the services outside of the inpatient arena, such as imaging labs.