KALAMAZOO — The $60 million downtown Kalamazoo cancer pavilion is one of a number of capital projects for Bronson Healthcare that are driven partly by the shift toward delivering care at outpatient settings.
Along with the cancer facility across from the Medical Office Pavilion on the South Campus in downtown, Bronson plans to develop a new $22 million hospital in South Haven and invest in a $3.8 million project to renovate inpatient rooms at LakeView Hospital in Paw Paw. The Kalamazoo-based health system also continues to weigh plans to develop a downtown outpatient surgery center.
While the health system announced each of the projects within a short period of time, the timing is coincidental, Bronson President and CEO Frank Sardone told MiBiz.
“We have a very comprehensive strategic planning process,” he said. “At any point in time, there are projects at various stages. They could be in the concept stage or the planning stages, or in the case of (the cancer pavilion), the execution stage.”
Construction on the five-story, 85,000-square-foot cancer pavilion, planned for a site at Vine Street and John Street, could begin this spring with occupancy targeted for early 2021. Diekema Hamann Architecture & Engineering LLC designed the facility, and CSM Group Inc. will manage the project for Bronson. Both firms are based in Kalamazoo.
In offering a “comprehensive approach” to cancer care, the pavilion will house Bronson’s adult outpatient cancer care, including hematology, an oncology clinic, an infusion center, diagnostic and genetic services, palliative care and other support services for patients, Sardone said.
The project will give Bronson a second cancer center, in addition to the Bronson Battle Creek Cancer Care Center.
Planning for the new downtown Kalamazoo pavilion began after the West Michigan Cancer Center and Institute for Blood Disorders, a partnership between Bronson and crosstown competitor Ascension Borgess, decided nearly a year ago to transition medical oncology and infusion services to each hospital. The move will allow both hospitals to integrate all of the medical care cancer patients require and provide continuity and coordination of care through their electronic medical records.
The change also was driven by capacity issues at the West Michigan Cancer Center that arose as most cancer patients today are treated as outpatients.
New care delivery
Developed 25 years ago in partnership with Borgess, West Michigan Cancer Center has been “very successful” and undergone past expansions before reaching capacity, Sardone said.
“Cancer care has shifted and evolved dramatically over the past number of years from predominantly being treated as inpatient to almost exclusively on an outpatient basis,” he said. “We’re at the point where although the care is great, we’re running up against capacity and space constraints. So the decision was made to take the medical oncology portion of activities that go on there to each hospital.”
Radiation therapy in Kalamazoo will remain at the West Michigan Cancer Center.
The steady migration from inpatient to outpatient care has been occurring for many years in health care, driven by advancements in medical technologies and techniques such as minimally invasive procedures. A report issued last summer by the Deloitte Center for Health Solutions noted that value-based contracting between health insurers and care providers also now drives more care to lower-cost outpatient settings that are more convenient for patients.
The trend shows up in hospitals’ revenue mix. From 1994 to 2016, U.S. hospital revenue from outpatient care, as a percentage of all revenue, grew from 28 percent to 47 percent, according to Deloitte.
As well, visits to outpatient facilities rose 14 percent from 2005 to 2015, and outpatient revenue per visit increased from $1,352 in 2010 to $1,962 in 2015, Deloitte reported.
“Many surgeries and medical and diagnostic procedures that once required an inpatient stay can now be performed safely in an outpatient setting,” wrote the authors of the Deloitte report. “Patients have embraced these changes as outpatient services tend to cost less — and be more convenient — than inpatient services.”
Need for beds evolves
In South Haven, Bronson aims to create a campus that focuses on primary care. The health system plans to replace the aging hospital, portions of which date back to the 1940s, with a facility that has far fewer inpatient beds.
After acquiring the former South Haven Community Health System more than two years ago, Bronson conducted a market analysis and “decided that the community really needed and deserved a new facility that’s tailored to what the community needs and uses,” Sardone said.
“This gives us the opportunity to build just that,” he said.
Work on the new South Haven hospital could begin by the end of 2019. Bronson targets completion by late 2020.
Once the new hospital is complete, Bronson plans to demolish the existing facility next door and convert the site to gardens and green space, according to a letter of intent filed in February with the Michigan Department of Health and Human Services.
Citing low inpatient and surgical volumes, Bronson plans to reduce licensed inpatient capacity at the new hospital from 49 beds to eight beds, and to halt surgeries in South Haven. For their procedures, patients in South Haven would instead go to LakeView Hospital in Paw Paw, located in southeastern Van Buren County, or to Kalamazoo.
Bed capacity at older hospitals such as South Haven is “really a remnant of a time when hospitals were almost exclusively inpatient settings,” Sardone said. As health care evolved over the last two decades to where more treatment is done on an outpatient basis, fewer inpatient hospital beds are required, he said.
“The licensed number sometimes has little connection to the reality of how much inpatient volume there is,” Sardone said. “That’s exactly what’s been happening in South Haven. It’s been decades since anywhere close to 49 beds were being used, so the new sizing really reflects what the utilization has been over the past decade or so.”
Shifting pay models
Likewise, LakeView Hospital will reduce from 25 beds to 16 beds under a renovation project presently undergoing state certificate-of-need review. Pending state approval, the renovation could begin in May and is targeted for completion in April 2020, according to Bronson’s CON application.
Meanwhile, Bronson remains undecided for now on final plans for an outpatient surgical center in downtown Kalamazoo. In November 2018, Bronson received state CON approval for a surgical center of more than 85,000 square feet with eight operating rooms at the downtown hospital campus on Portage Street.
Bronson continues to refine plans for the project, which when reviewed by the state last year carried a cost of more than $60 million.
The shift to outpatient care that affected the number of licensed beds proposed for both South Haven and LakeView “has a real impact on surgery” as well, Sardone said.
Medicare continues to classify more surgical procedures as “outpatient only” for reimbursement, leaving hospitals “kind of playing with a moving target of payment models and what the setting is that we’re required to use for that particular surgery,” Sardone said.
“We are definitely going to be adding surgical capacity. We are still in the planning stages of figuring out exactly how to size that (and) how to structure that,” Sardone said. “We have plenty of other projects that we’re working on right now, so it’s also a matter of the capacity to manage multiple projects.”
Bronson should decide on a final plan for the outpatient surgical center within a few months, he said.