🔒Johnson Memorial Hospital eyes $17.8M Enfield surgical center, to be partially owned by physicians

After completing a $6 million renovation and reopening its cancer center in Enfield last summer, Johnson Memorial Hospital has proposed a more than $17 million upgrade to its nearby surgery center that would include making it an outpatient facility partially owned by physicians.

The proposal is part of a larger $40 million investment in Johnson Memorial’s Enfield campus, and it reflects elements of a value-based care model that aims to lower costs and improve patient outcomes, officials said.

According to a project application filed with the state Office of Health Strategy, which needs to approve the plans, Johnson Memorial wants to convert its existing Enfield surgical facility operations from a hospital-based outpatient department to a freestanding outpatient surgical facility located on the second floor of a $17.8 million, 43,200-square-foot medical office building already under construction on the Hazard Avenue campus.

In addition, Johnson Memorial, which is owned by Trinity Health Of New England, would transfer ownership of the surgical center to a new joint venture, called the Enfield Surgery Center. Trinity Health Of New England would hold a 51% stake, while physicians would own the remaining 49%.

Trinity Health identified Greater Enfield as a key market in which to expand and modernize its ambulatory services, according to the project application, known as a certificate of need. Based on that, the organization undertook a “refresh” of the Enfield campus, including renovating its Karen Davis Krzynowek Cancer Center and constructing a new surgical center.

Many health systems in Connecticut and nationwide have been shifting non-emergency care out of hospitals to lower-cost urgent care or outpatient surgery centers. The trend has led hospital operators, like Trinity Health, Hartford HealthCare and Yale New Haven Health, to open new or acquire stakes in existing surgical centers.

Other companies, like insurers and private equity firms, have also been investing in freestanding, outpatient surgical centers, which are seen as future growth engines.

Johnson Memorial, which has its main campus in Stafford, projects its modernized Enfield surgery center will perform over 5,000 procedures during its first full year of operation, and more than 6,000 by its third full year.

In fiscal year 2022, the hospital reported $65.8 million in operating revenue and an operating loss of $13.3 million, according to the Office of Health Strategy.

Value proposition

Johnson Memorial’s new building, called the Ambulatory Care Center, is set to be completed in May and go live this summer.

The existing Enfield surgical center, which is located on the same campus, has four licensed operating rooms but “is outdated and outliving its useful lifespan,” the hospital said. The new facility will have four state-of-the-art operating rooms and two recovery rooms, although only three operating rooms would function at the start, with the fourth “coming online as demand increases,” the hospital said.

Johnson Memorial “has operated an ambulatory surgical center in Enfield for several decades,” said hospital President Dr. Robert Roose in an interview with the Hartford Business Journal.

The modernized facility, he said, will expand and enhance the care the hospital can provide, and complement industry trends of shifting less-serious, lower-risk inpatient surgical cases to outpatient facilities, and forming joint ventures between physicians and hospitals.

Partial ownership will incentivize participating physicians to “provide low-cost, high-quality care to patients, thus resulting in a value-driven operation,” the hospital said.

In surgical centers where surgeons and hospitals are part owners, Roose added, “you can deliver care in a way that’s going to be the highest standard, but also in a way that is the most efficient utilization of resources, which can keep the costs down for the patients and overall community.”

Participation in the joint venture does not require physicians or surgeons to be part of practices owned by Trinity Health Of New England, Roose said.

“We are in the process of engaging private and employed surgeons and physicians from the community,” he said. “As we create the organization that will be managing the center, we will have more information as it develops.”

Jeffrey Hogan, president of Farmington-based Upside Health Advisors and a healthcare consultant, said converting a surgical center to an outpatient facility partially owned by physicians makes sense as a way to reduce the cost of care.

“There are only a certain number of specialists who do these things, and they’re attracted to ownership,” Hogan said. “They want skin in the game.”

He said physicians and surgeons also benefit because they get “predictable lower costs for high-volume services.”

The decision, he added, reflects the fact that hospital systems now realize that “a lot of treatment is going out of the hospitals, because hospital prices have been consistently rising by double digits.”

In order to stay competitive and maintain some of that revenue, hospitals “have to offer an attractive business case to attract surgeons,” which includes an ownership stake in surgical centers, Hogan said.

Johnson Memorial’s project application also notes that converting from a hospital-owned and operated facility to a joint venture would eliminate hospital facility fees, further reducing care costs.

Health systems charge facility fees for outpatient services provided in a hospital-based setting in order to cover operational expenses.

Expanded services

The new outpatient surgical center would offer a range of surgical procedures, Roose said. The existing center already offers gastroenterology, general surgery, ophthalmology, orthopedic surgery, podiatry surgery, urology, gynecology, obstetrics and colorectal procedures. The newly built facility would add neurosurgery.

It will also house Johnson Memorial’s outpatient imaging center on the first floor, as well as laboratory services and medical office space, allowing patients to receive most of their care in one location, Roose said.

Hospital officials declined to discuss how the change to an outpatient surgical center would affect staffing levels, saying that decision will be made by the joint venture and any discussion of the topic was premature.

Nurses at Johnson Memorial Hospital are members of AFT Connecticut union and work under a union-negotiated contract, but with the joint venture, nurses at the surgical center would not be hospital employees.

“The operating rooms and surgical procedures provided at Johnson Memorial Hospital in Stafford are not impacted in any way by this process,” Roose said. “We continue to provide surgical procedures at the main hospital.”