Hospital admission declines persist as patients’ costs rise

A drop in U.S. hospital admissions that is hurting profit at Community Health Systems Inc., Tenet Healthcare Corp. and other operators may persist as companies and consumers grapple with shifts in health care economics.

Community Health, the second-largest U.S. hospital system, reduced its full-year earnings forecast last week as it said 2013 admissions would fall 1% to 3%. Tenet, the third-biggest hospital chain, said last month second-quarter admissions would drop 3.5%.

Hospital admissions have been falling as patients who have seen their deductibles rise put off seeing a doctor and as some types of services are being shifted away from inpatient to outpatient treatment. Hospitals also are being squeezed by the Affordable Care Act and related government efforts to improve care, curb costs and eliminate excessive readmissions.

“We’ve seen such a long trend of weaker volume despite the improving economy and it will be a lasting change for the industry,” says Megan Neuburger, a senior director at Fitch Ratings in New York. “A lot of this is a shift from inpatient to outpatient. At some point, there will be a baseline. When do we get to that bottom? No one knows.”

Same-hospital adjusted admissions dropped 2.7% industry-wide in the first quarter, according to a Fitch report Neuburger wrote in June. The percentage of insured workers with a deductible of $1,000 or more for single coverage jumped to 34% in 2012 from 12% in 2007, according to a study last year by the Henry J. Kaiser Family Foundation and the Health Research & Education Trust.

HCA Holdings Inc., the largest publicly traded hospital chain, has so far been the outlier -- saying July 16 that it will report a 1.3% gain in same-facility admissions for the second quarter. The Nashville, Tenn.-based company says net income was about 91 cents a share, topping by 13% the average of analysts’ estimates compiled by Bloomberg.

Despite HCA’s growth, analysts say hospital operators are experiencing systemic shifts in how they care for and charge patients.

“The bottom line is that the jury is out about whether volume will ever return to hospitals, whether HCA’s increase was real or just a fluke, or if the volume shortfall will carry into next year and eliminate the upside of health reform,” says Sheryl Skolnick, an analyst at Stamford, Connecticut-based CRT Capital Group LLC.
At the same time, for-profit hospitals are facing an increasing number of federal investigations into overly aggressive admissions and Medicare and Medicaid billing — probes that may be further curtailing admissions.

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