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Diversification pays off for hospitals.

Hospital diversification efforts are succeeding financially, a recent national survey disclosed. That adds support to broader laboratory testing activities since virtually all of the diversification is related to health care.

The survey-conducted last fall by Hamilton/KSA, Atlanta, for Hospitals magazine-drew responses from 623 hospital chief executive officers out of 2,000 contacted. In its Jan. 5 issue, the magazine said most CEOs reported making a profit or at least braking even (the survey's standards for success) in 18 out of 19 diversification areas.

Fewer than half the strategies were actually profitable, however. As Figure I shows, seven types of diversification made money for the majority of institutions that used them in 1988: freestanding outpatient surgery, freestanding outpatient diagnostic centers, inpatient rehabilitation centers, outpatient psychiatric centers, women's medicine programs, industrial medical clinics, and substanceabuse treatment centers.

Of these, psychiatric centers made the biggest gain over survey findings a year earlier. They were profitable for 55.4 per cent of the hospitals last year, up from 40.4 percent In 1987 . Including hospitals where they broke even, psychiatric centers had an 81 percent success rate, up from 70.2 per cent the previous year.

Other clear gainers were industrial medicine, profitable for 51.9 per cent of the hospitals (up from 43.2 per cent) and successful for 85 per cent (up from 80.9 per cent); women's medicine programs, profitable for 54.7 per cent (up from 48.8 per cent) and successful for 81.7 per cent (up from 76.4 per cent); and inpatient rehabilitation centers, profitable for 60.3 per cent (up from 58.1 per cent) and successful for 88.9 per cent (up from 81.7 per cent).

On the other hand, increased competition caused profitability and/or success rates to drop for freestanding outpatient surgery, freestanding outpatient diagnostic centers, and substance-abuse treatment centers.

Wellness and health promotion programs were the only diversification area that lost money for the majority of hospitals. The Hospitals magazine article noted, however, that such programs are seen as loss leaders in many communities, building up goodwill and ultimately benefiting their sponsors. For more about this, read MLO next month. Weliness testing will be our cover story.
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Author:Fitzgibbon, Robert J.
Publication:Medical Laboratory Observer
Article Type:editorial
Date:May 1, 1989
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