Where Should You Grow? Identifying Healthcare Market Opportunity

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By Bill Stinneford

Opening new healthcare facilities isn’t the same process that it used to be. The old “If you build it, they will come” mantra is no longer a guarantee, which means providers need to take a hard look at their market opportunities before making real estate decisions.

You could assess market opportunity based solely on macro level factors such as population growth and existing healthcare supply, but this approach doesn’t paint a complete picture. The next time you are planning to expand into a new market or infill an existing market, consider these three steps for a more accurate assessment.  

1. Understand What Makes a Location Successful

Before you can identify the right market opportunities for your organization, you need to understand quantitatively what makes your locations successful. Success is typically driven by two sets of variables:  

Healthcare Variables

Traditional healthcare variables on supply (existing physicians in the market) and demand (estimated use rates for specific healthcare services) provide the first glimpse into market dynamics. What’s the current balance of supply and demand around your most successful locations? At what level does the competition become too high to sustain a facility? 

Retail Variables

The healthcare industry is driven by more than just supply and demand. Today’s patients view healthcare like any other type of consumer service, which means healthcare organizations of all types need to consider traditional retail variables.

What’s the consumer profile of your patients – not just in terms of demographics, but also in terms of lifestyles? Two patients with the same demographics may have radically different lifestyles that affect their healthcare needs and preferences, so it is critical to dive deeper.

But incorporating retail variables is about more than understanding consumer profiles. Are there specific cotenants or traffic generators that correlate with increased visits at your facilities? How far are patients traveling on average to visit one of your facilities and providers? How do qualitative factors like signage or real estate type influence performance?

2. Find Market Opportunities by Identifying New Locations That Look Like Your Best Locations

The healthcare and retail variables associated with successful locations can be combined into a custom site selection model or service line model. These models can be used to assess markets and identify:

  1. How many locations the market can support
  2. Where those locations should be placed

This analysis shows you the gaps in your current or potential markets based on the factors that are important for success. It gives you a realistic view of market opportunity and a “roadmap” to guide your expansion efforts.

3. Consider the Role of Facilities in Your Overall Access Strategy 

In today’s environment, market planning decisions cannot be made in a vacuum. Instead, they should be made in the context of a holistic patient access strategy. In this new environment, traditional facilities become just one of the many channels consumers use to interact with a healthcare provider and develop a cradle-to-grave relationship that’s focused on staying well – not simply treating illness. 

Sometimes consumers will choose to seek care in an emergency department, sometimes it will be through a system or partner-owned outpatient clinic, and sometimes it will be through virtual care. There is no one-size-fits-all combination because the answer truly depends on the unique preferences of each consumer.

Before you finalize real estate decisions, consider the types of consumers present in the market and how they prefer to access care. The magic ratio of physical office visits to virtual care visits may vary from market to market, which means that market research is critical for success. Armed with these insights, you can refine your projections on the appropriate number of facilities to support demand. 

The Bottom Line

Identifying market opportunities may seem daunting, but it doesn’t have to be. By understanding the quantitative factors that influence your performance, identifying trade areas with the right mix of variables, and considering the role of facilities in your overall access strategy, you can understand your organization’s true market opportunity in any current or potential market.

About the Author

Bill Stinneford is senior vice president at Buxton, a consumer intelligence company that equips healthcare organizations with the insights they need to navigate a changing healthcare landscape.