Hospital systems are setting their strategic plans with the assumption
that inpatient care will continue to decline.
One of the nation's largest hospital chains, Community Health Systems
in Franklin, Tenn., reported last week that nearly 5% fewer patients were
admitted to its hospitals last year. The news followed announcements by
LifePoint Hospitals, Brentwood, Tenn., and HCA, Dallas, that hospital visits in
the fourth quarter dropped 3.9% and 1%, respectively. Not-for-profit Partners
HealthCare in Massachusetts recently announced that 3.6% fewer patients were
admitted across its dozen hospitals in 2013.
Those declines are not unique or surprising, given changes to
healthcare payment and delivery, prolonging a trend that began with the Great
Recession, hospital leaders and consultants say. “The majority of hospitals and
health systems are seeing a flattening of their inpatient volumes,” said Jeff
Jones, a managing director for Huron Consulting Group. “Some are beginning to
see a sustained decline.”
An important driver is that more Americans are covered by health plans
with high deductibles, copayments and coinsurance, dampening demand for
elective procedures that require hospitalization, analysts said.
Meanwhile, a growing number of procedures can be performed outside the
hospital in less-costly outpatient settings.
Also, new Medicare policies have boosted the financial incentives for
hospitals to strengthen management of chronic diseases and keep patients out of
the hospital. Those policies have been mirrored to some extent by private
payers, which increasingly offer bonuses to hospitals and doctors for curbing
costs.
The slow economic recovery is also a factor, though its influence is
uncertain as the recovery continues. “Nobody can really say how much of the
weak trends are explained by the economy,” said Megan Neuburger, a senior
director for Fitch Ratings.
Slack demand has hospital operators reducing their costs and looking
for ways to expand revenue. Some have pursued deals in growth markets, such as
LifePoint Hospitals' recent acquisitions in Michigan's Upper Peninsula,
Neuburger said.
Ascension Health, St. Louis, the nation's largest not-for-profit health
system, told Moody's Investors Service analysts that it would improve its
financial position by $170 million through expense cuts and new revenue
initiatives, after inpatient volumes fell below expectations last year.
Growth of high-deductible plans a factor in reducing hospital
utilization
Not-for-profit Bon Secours Health System, Marriottsville, Md., projects
declines of 1% to 2% in coming years after two years of flat admissions gave
way to a decline of 3% in recent months, said Janice Burnett, the system's
senior vice president and chief financial officer.
She attributed the bulk of recent declines to the growing number of
Medicare patients held on observation status rather than being admitted, which
results in lower Medicare payments. The rest is due to pressure to reduce
unnecessary admissions.
The continued shift of care from hospitals to ambulatory settings is
expected to drive fewer hospital visits for the next two years.
Bon Secours moved to cut expenses as hospital admissions began to flag
nearly three years ago. The system has slashed $110 million from operating
costs during the past two years and will squeeze another $40 million from
expenses by the end of its fiscal year in August. That amounts to an annual
reduction in operating expense, including labor and supplies, of 1.7% a year.
To offset its continued admissions declines, Bon Secours' strategic
plan calls for another $150 million in cuts during the next three years. That's
in addition to $30 million in savings annually from efforts to increase its
clinical efficiency.
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