Over five years, Carilion Roanoke Memorial Hospital's share of regional inpatient hospital admissions has grown as its nearest competitor's slice of the pie has remained relatively unchanged.

Market share gains in some of the hospital industry's busiest inpatient services have been commonplace at Carilion Clinic's flagship hospital in Roanoke, while neighboring Lewis-Gale Medical Center has experienced stagnant growth and in some instances lost ground, according to an analysis of five years of state hospital data.

Market share is a vital part of the health care business. Hospitals, insurance companies and industry experts use the information to gauge competitive strength. Market share also helps inform contractual agreements between insurance providers and hospitals as they negotiate the price tag for various procedures.

"Hospitals like it because it's a measure of the scope and performance of their inpatient services relative to other hospitals," said Jon Thompson, professor and director of the health services administration program at James Madison University. "It signals that their business is increasing or decreasing."

One of the concerns with higher market share is that it may affect pricing of services, Thompson said. But he cautioned that is not always the case because higher volumes can frequently translate into higher quality and lower per-unit costs.

As Carilion, a nonprofit clinic, remains under public scrutiny for what critics describe as monopolistic behavior, market share information can shed some light on the amount of choice patients have in receiving treatment for a variety of inpatient services. The data maintained by Virginia Health Information cannot address whether Carilion's pricing is noncompetitive.

Billing data source of market share comparison

From 2003 to 2007, Carilion's Roanoke hospitals gained nearly 2 percentage points in overall regional market share, while Lewis-Gale saw its portion slide slightly more than 1 percentage point. VHI defines the Southwest Virginia region to include areas from Appomattox County west and Alleghany County south.

Because of the way VHI collected the data in 2007, information from Roanoke Memorial and Carilion Roanoke Community Hospital was lumped together under the name Carilion Medical Center. Still, the vast majority of services were provided at Roanoke Memorial.

And while Carilion saw relatively small gains in total regional inpatient market share, Roanoke Memorial made significant gains in many of the most common areas for hospital admissions, such as orthopedic surgery.

For Carilion, the results were unexpected, said spokesman Eric Earnhart, adding that Carilion's ongoing business model transformation from a hospital-centric system to a clinic-based health care provider could have reduced Carilion's market share.

"We had thought there could even be a loss in market share," Earnhart said. "We're pleased that people chose to come to us, but I want to be clear market share is not the focus of what we're doing."

Lewis-Gale officials insist that once data are available from 2008, the picture will look more favorable for them.

"I believe you are going to see market share growth for Lewis-Gale Medical Center, specifically in 2008," Chief Executive Officer Victor Giovanetti said.

Lewis-Gale is the flagship for HCA Southwest Virginia, the for-profit hospital system that is part of the national hospital giant HCA Inc.

Giovanetti, who serves as president of HCA Southwest Virginia in addition to his chief executive role at Lewis-Gale, said the regional strategic plan for HCA is to focus on creating new access to services. Doing that, he said, has helped to shape the upcoming growth.

The VHI information is based on billing data supplied by hospitals to give industry experts, and to a lesser extent consumers, a clearer picture of the statewide and regional health care marketplace.

Similar information for outpatient services is not available, but the inpatient data illustrate a significant part of each facility's business. At Lewis-Gale, gross inpatient revenues accounted for nearly 58 percent of its $600.6 million in total gross revenues.

The picture is similar for Carilion, where about 60 percent of the combined $1.4 billion in gross revenues of the two Carilion Roanoke hospitals came from inpatient revenues.

In hospital finances, gross revenues are billed charges and don't account for contractual agreements with insurance companies and other discounts.

Carilion shows gains in specific services

VHI categorizes inpatient procedures into 38 service areas, such as orthopedic surgery and rehabilitation. Each service line includes several procedures. For example, lumped into the orthopedic surgery category are knee and hip joint replacements, lower limb amputations and others, making it one of the categories with the highest volume of patient admissions.

In orthopedic surgery, Roanoke Memorial had 28 percent of the region's cases and Lewis-Gale had 12.1 percent in 2007.

Five years earlier, Roanoke Memorial had 19 percent of the region's orthopedic surgery cases to Lewis-Gale's 13.4 percent, meaning Roanoke Memorial gained nearly 9 percentage points while Lewis-Gale's market share fell slightly.

Carilion spokesman Earnhart credited the reputation of Carilion's orthopedic surgeons as a reason for the increase in orthopedic surgery market share. Earnhart also noted many orthopedic surgeries are related to trauma and emergency situations such as broken bones from car crashes.

Among the 10 busiest inpatient service lines for the region in 2007, Carilion gained or remained unchanged in its market share of eight categories when compared with 2003. Carilion experienced a small decline in psychiatry and general surgery.

The picture is much different for Lewis-Gale: The Salem hospital saw virtually no market share gains among the same 10 service lines.

Lewis-Gale lost ground by 1 percentage point or more in seven of the 10 areas when looking at the changes between 2003 and 2007.

And in 2007, Lewis-Gale was the market leader among hospitals in Virginia's Southwest region in just one of the 38 different services: rehabilitation. The facility garnered 32.1 percent of the southwest region's market for rehabilitation.

But while Lewis-Gale held the position it had five years earlier when the hospital had 32.5 percent of the inpatient hospital rehabilitation market in the region, Roanoke Memorial's share of the rehabilitation market grew from 21.2 percent to 25.8 percent.

Of the market share figures for the 38 service lines, Lewis-Gale outpaced Carilion in just one other instance, psychiatry. But even in psychiatry, Centra Health treated more patients than Lewis-Gale.

Centra, a Lynchburg-based nonprofit hospital system, served 21.6 percent of the region's psychiatry cases to Lewis-Gale's 19.9 percent and Roanoke Memorial's 17 percent.

Go outside Roanoke and include Carilion New River Valley Medical Center, which saw 12.6 percent of the region's psychiatric cases, and Carilion Clinic is the clear leader.

More physicians could mean more market share

Despite Carilion's predictions that its conversion to the clinic business model would hinder its market share, it's possible that it had the opposite effect.

The increased market share could be a direct result of Carilion's business strategy to employ more physicians as it converts to a clinic system, JMU's Thompson said.

More affiliated physicians throughout the region could feed more referrals to inpatient services. "But that remains to be seen," he said.

As the hospital has worked to hire more physicians, the medical staff at Roanoke Memorial has increased 47 percent from 361 physicians in 2004 to 532 in 2008.

In many ways market share is tied to the number of physicians working in, or affiliated with, a hospital. In short, more physicians available to treat patients could mean more patients are heading to Carilion.

"If they've recruited more physicians in primary care and specialty care, that is going to tend to increase the number of patients they see on an outpatient and inpatient basis," Thompson said.

Additionally, the other hospitals in the Carilion network sometimes have to refer patients to Roanoke Memorial for certain procedures that may not be available at the smaller hospitals. The same situation exists within the HCA Southwest Virginia network, with other smaller HCA hospitals feeding cases to Lewis-Gale.

Similarly, by adding new services, Carilion could be attracting people from outside the primary service area, which would also contribute to their volumes of both inpatient and outpatient, Thompson said.

Still Earnhart said if the clinic conversion is successful, the hope is for a decrease in inpatient hospital market share.

"Our goal is not to increase market share," Earnhart said. "That's a little bit of a change, because we are not a hospital organization anymore. So our goal is not to drive volume to hospital but to increase the number of services available so patients can stay in the area instead of leaving the region for treatment."

The clinic model is focused on preventive care and outpatient services to keep people from having to be admitted to the hospital, he said.

"The take-home message is that going forward, if we are able to do what we want to with the clinic and goals of the clinic, our market share should go down," Earnhart said. "And that would be a good thing."

In Salem, Lewis-Gale officials maintain that additions to its medical staff and changes to its services bolstered its market share in 2008. VHI data for 2008 won't be released to the public until the fall.

While Giovanetti would not provide many specifics related to volume of growth in 2008, he said increases occurred in a number of service lines including behavioral health, cardiovascular services and orthopedic surgery.

HCA has also benefited from physicians who have decided to switch their hospital privileges from Carilion to Lewis-Gale, Giovanetti said.

"We're not only providing more services, but we're seeing more and more physicians who are or want to be closely affiliated with Lewis-Gale," he said. "That's the key part of the foundation on which we will build our success and growth."

Lewis-Gale has a long way to go before it reaches the levels of market penetration Carilion has garnered.

In some ways Carilion's leadership in the market is expected, and with 825 beds, Roanoke Memorial has the capacity to serve more people than Lewis-Gale, which has 521 licensed beds.

As the only level-one trauma center in the region, Roanoke Memorial is designated to be the busiest regional hospital for emergencies. Many traumas and emergencies ultimately feed into other inpatient services.

When it comes to the number of hospital patients admitted, Roanoke Memorial is the second-busiest in the state. Only Inova Fairfax Hospital in Northern Virginia sees more patients.