Tougher to get in than Harvard: The $100M Texas hospital where everyone wants to work

At first glance, it seems like a classic David-and-Goliath battle playing out in the Dallas-Fort Worth healthcare arena. In one corner is 100-bed Walnut Hill Medical Center, a new for-profit hospital that opened in April; and literally across the street is 900-bed Texas Health Presbyterian Hospital Dallas.

Except that Walnut Hill is only one of numerous small hospitals opening in the highly competitive North Texas region over the past several years; and Presbyterian is only one of several nearby hospitals.

"It is a very competitive market. We probably have at least seven hospitals within seven miles of us," Cory Countryman, Walnut Hill's CEO, told Healthcare Dive. That includes small physician-owned hospitals, big not-for-profits, and flagship hospitals for Hospital Corp. of America (HCA) and Forest Park Medical Center in Dallas.

By all accounts, North Texas has an entrepreneurial healthcare market that is in the midst of significant bricks-and-mortar construction alongside provider/payer efforts to create value-driven delivery models.

Yet Countryman said he is confident Walnut Hill will find a niche in the crowded field by offering "a fantastic patient experience, a fantastic physician experience, and a great place for people to work." Customer-first strategies from major companies are being used to try to make it happen: including Starbucks' relaxing ambiance, Apple's upfront use of customers' names, and Ritz Carleton's "15-5" rule in which staff smile at customers from 15 feet away and greet them at five feet.

There are many potential customers. Of Texas's 28 million residents, about seven million live within about a 30-mile radius of Dallas, said Steve Love, the Dallas-Fort Worth Hospital Council's president and CEO. This North Texas region "grows the city of Atlanta every five years," he said.

Population growth and a booming economy have led health systems in the area to add five to seven hospitals in the past five years or so—"what I'd call normal, organic growth given the demographic change," Love told Healthcare Dive. On top of that, he estimates "easily four, five or six" physician-owned hospitals have sprung up in the region in the past several years.

Initially, Walnut Hill was going to be a cardiology hospital, but it was accredited recently by the Joint Commission as a full-service hospital with a 16-bed intensive-care unit and a 10-bed emergency department, Countryman said. "We passed with flying colors on our first try," he said.

Most DFW hospital council members are "more traditional" community hospitals taking Medicare and Medicaid, and running Level 1 or Level 2 trauma centers, Love said. He termed physician-owned and -led hospitals as "more niche players, in my opinion, targeting certain types of surgery." Walnut Hill is "more of a niche player. I know they're full-service, but they seem to do a lot of cardiac," he said.

Texas is not a certificate-of-need state

Texas Hospital Association spokesman Lance Lunsford describes the state as "extremely healthy terms of economics, but you've got an unhealthy state in terms of physical health and well being...and one-quarter of the population doesn't have [health] insurance." Moreover, Texas is not a Medicaid expansion state; its Medicaid program limits coverage to children, pregnant women and disabled adultsand more than 1 million Texans have been thrown into a coverage gap under the Affordable Care Act.

Since Texas is not a certificate-of-need state, state regulators don't have to give their blessing before hospital projects begin. Get financial backing and it is possible to build new facilitiesor expand with major capital improvement projects, as Parkland Health & Hospital System and others are doing.

Walnut Hill's construction took about one-and-a-half years, with a hefty price tag. "Between bricks and mortar, supplies and equipment, you could say it's a $100-million hospital," Countryman said.

But, he said, "As long as we take care of the patient the right way, the finances will fall in line."

Walnut Hill expects to become profitable within five years, he said, though there could be reasons for a longer wait. "You can take money and put it back in the hospital and that delays profitability," he said.

As for payer mix, the new hospital is taking Medicare and Medicaid, and it has "either contracted with or is about to sign with every [commercial] payer in the Dallas-Forth Worth metroplex," Countryman said. He anticipates that all major contracts will be in place by August, asserting that insurers are inclined to contract with Walnut Hill because of its "experienced, high-end" physicians. Walnut Hill also is starting the process of direct contracting with employers, he said.

"We take everybody except for OB patients. We don't deliver babies"although in one recent case the hospital had to make an exception, he added.

Many factors make Walnut Hill unique, including the fact that it isn't owned by, or affiliated with, another hospital or health system, Countryman said. "It allows us to create our own culture [without] going through a big corporate office," he said.

Cardiologists came up with the idea and helped to design a building full of natural light with a healing environment, advanced technology for physicians and numerous amenities for patients and their families, he said. Included are valet parking, all private rooms, valet parking, free Wi-Fi and no visiting-hour restrictions. Operating rooms on the cardiology floor are audio-visual wired; Walnut Hill is slated to be one of several hospitals streaming live cases to a vascular medicine conference this fall.

Countryman said Walnut Hill's physicians work as part of the new hospital's management in a highly collaborative process: Administrators, physicians and staff talk regularly about patient care and the hospital environment. "We run everything past [the physicians]...to make sure we're all on the same page," he said. Yet physicians don't own Walnut Hill; non-physician investors based in Texas own it.

Tougher than getting into Harvard

"We had over 7,000 applications for people wanting to work here. It's tougher than getting into Harvard University," Countryman said. Currently, Walnut Hill has 350 physicians credentialed; and 201 staff members, including nurses and administrative staff.

Of Walnut Hill's credentialed physicians, 35 to 40 are cardiologists performing cutting-edge procedures and exploring relationships with national corporations and organizations, he said. A year ago, former president George W. Bush's heart surgery to clear arterial blockage was performed by Dr. Tony Das, an interventional cardiologist who is one of Walnut Hill founders, a board member and a physician leader. "He did it across the street [at Presbyterian] because we weren't open yet," Countryman said.

Walnut Hill is "taking baby steps," Countryman said. "We opened the first week of April, and we're just now inviting ambulances to come to the hospital," he said July 29. "We want to make sure we're doing everything right....We had our first open-heart surgery last week and it went very well."

North Texas's entrepreneurial market

"There are five major metropolitan areas in Texas and this [Dallas-Fort Worth] is probably the most entrepreneurial," healthcare economist John McCracken, Ph.D. told Healthcare Dive. In addition to community hospitals, he cited numerous physician-owned hospitals, retail and urgent-care clinics and freestanding specialty surgery centers, and strong growth among physician groupswith specialists dominating the market and driving hospital admissions in the area.

"So it's very entrepreneurial, specialist-driven, and financing is available for growth. It's possible we're growing beyond our needs...but there's a lot of experimentation," said McCracken, clinical professor of healthcare management at the University of Texas at Dallas.

New entrants, such as Walnut Hill, are trying to carve out a portion of the healthcare business, he said, and dominant systems are seeing some of their more profitable markets being taken over. Citing Walnut Hill's listed specialtiesincluding cardiology, imaging, orthopedics and rehabilitation, he said: "They've chosen not to handle the unprofitable services. It's a carve-out of profitable services."

Big healthcare systems "are trying to lock up primary care physicians...and smaller facilities like Walnut Hill are trying to capture patients," McCracken said. "Who's going to be right? The jury is still out on that....I think it will be a decade or more before the market stabilizes" with team-based care organized around patient populations and disease states. He said Walnut Hill will keep watch on developments and align with the "winners"physicians if they are in charge or health systems if they are leading the ventures.

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