Medical technology, cost control drive down hospitalization ratios
A dive into current revenue models of the U.S. health-care system and its performance is an exercise in head-scratching. Think about this: The nation’s number of licensed beds, key generators of hospital revenue, fell 38.6 percent between 1975 and 2015, from 1.47 million to fewer than 900,000. Over that same time frame, America’s population increased by nearly half—but hospital admissions actually dropped, from more than 36 million to 35.4 million.
Despite those trend lines, hospital revenues nationwide have increased by more than the rate of inflation, up 21.1 percent between 2009 and 2014 alone, to reach $923 billion. And between 2004 and 2014, in the thick of that hospital-bed consolidation, the number of hospitals in U.S. health systems actually rose by more than 20 percent, from 2,650 to nearly 3,200.
How to read those tea leaves? A great many factors exert force on every hospital and health-care metric, but one factor that drives all of those numbers, even the ones that seem inconsistent, is the change in how health care is being delivered. And one of the biggest variables is the increase in outpatient treatment, which is altering the shape of the provider playing field in ways that touch health systems, insurers, employers offering health-care coverage, and the employees at the bottom of that pyramid.
Whether they are publicly owned, non-profit or for-profit in their structure, hospitals across the spectrum have engaged in organizational remodeling and a capital spending push to take their care deeper into their communities, away from the model of the monolithic medical center, and engage patients earlier, more efficiently, and more frequently.
So how, one might ask, could that goal square with what’s happened to America’s health-care costs? That’s where you have to consider what the metrics don’t show you: The incalculable size of our health-care spend if the acute-care model had remained intact.
“Everyone is interested in convenient care, with as little downtime as possible, at an affordable cost,” said Mike Jensen, Olathe Health’s vice president of marketing and external affairs. “That is what has driven our major emphasis on adding outpatient clinics and services for primary care, with priority same-day scheduling, urgent care, imaging, rehabilitation, surgery, home health, and many other services in convenient locations, with expanded hours of operation.”
Some of the market’s brute forces at work on that suburban health system were behind the $100 million expansion project it announced in 2015. That’s wrapping up with a new 25,000-square-foot cancer center, expected to open in the spring, to aggregate all outpatient cancer services at one site.
Those forces hit home in the urban core as well, notes Charlie Shields, CEO at Truman Medical Centers, which fulfills a safety-net role by treating larger numbers of under- and uninsured low-income patients, and doubles as an academic medical center. “So what we’ve done over the past few years is make a conscious effort to move our clinics and outpatient care out of the main hospital, into community settings,” he said, like those in Raytown, Independence, Grain Valley and, starting in February, at the Linwood YMCA.
In addition, TMC has clinics in Hy-Vee grocery stores, and now has a large outpatient surgery center, University Health, at 22nd and Charlotte. But it’s not stopping there, Shields noted: TMC is now planning for another large outpatient medical office building on the south side of 22nd Street. “Clearly,” he said, “the trend is to move services outside the main hospital and get closer to the community, with access, drive up, parking, etc.”
The health-care economy is calling providers to be more consumer-focused, executives say, and that’s just what administrators are focused on at the region’s largest medical center, the University of Kansas Hospital. Fresh off completion of its new 11-story Cambridge Tower A, at a cost of $360 million, the parent health system is also opening other facilities in the area and preparing more outpatient services in the spaces that will be vacated to relocate patients in the new addition.
Chris Ruder, vice president for patient care services and associate chief nursing officer, said it’s part of an organizational mission to provide the best quality and service to the patient and family in the most efficient way possible. “That triple aim in health care has resulted in innovative ways to leverage technology and care processes to support the right care, at the right time in the right place,” he said. “There are elements of care that have historically only been accomplished in hospital settings. Today, we know there are safe and effective ways to deliver this same care in the ambulatory setting or the comfort of a patient’s home.”
The reality of health-care delivery, executives say, is that a sector groaning under the pressures to contain costs had almost nowhere else to turn.
“The lower level of care is always less expensive,” says Robin Harrold, vice president for the ambulatory health network at Shawnee Mission Health. “Physicians’ offices are the first line of defense for sick care,” she said. “Next are urgent-care services with extended hours, open on weekends when sometimes primary care offices aren’t available. Finally, there’s the emergency room. But we all have a role to play in helping the community know the best site, location, and cost for treating the illnesses they have.”
To do that, Shawnee Mission health has increased its presence in each facet of care in recent years, she said. And has plans for more. “We know that convenience and access are most important to consumers,” Harrold said, “but when they need more acute services, that’s when you think about your hospital.” The transition from inpatient to outpatient isn’t simply a matter of realocating physical resources, executives say; rather, it’s a shift in the way the entire organization thinks about its relationship with patients.
At HCA Midwest Health, “we’ve done a tremendous amount of work to position ourselves to provide increased access and more convenience, creating a better experience for the patient as they transition and receive care in an outpatient setting,” said chief marketing officer Holly King. That’s been done by creating an urgent-care platform and by placing new emphasis on primary care, patient navigators and the concept of patientcentered medical homes, as well as with technology to schedule appointments on-line, offer extended hours and locate physical clinics in drug stores. “We believe that by creating more access, we create better communication with patients and a better journey for them as they travel through the care system,” she said.
And it’s all paying off as patients buy into the changes—some more quickly than others. HCA’s chief medical officer, Darryl Nelson, said he saw the transformation start to take place when he was still practicing as a family physician in Lee’s Summit several years ago, and it’s taking hold. “There are some patients that are surprised they’re not going to be put in the hospital, or be there for longer periods,” he said. “But as hospitals are becoming higher-acuity entities, there are expectations that patients at a certain level will maintain their status as in-patients.”
The economy, he said, had hastened change, “because when folks realize they’re on the hook for more of the cost of their care, they see that’s typically costing more in a higher-acuity setting, and we see more sensitivity around that.”
That consumerism is also rolling upstream, affecting insurance companies as well as employers offering companypaid health coverage. Greg Sweat, chief medical officer for Blue Cross Blue Shield of Kansas City, said clients are seeking solutions that “provide better convenience and better consumer experiences across the board.”
As the region’s largest health insurer, BlueKC is in a position to support the trend by reimbursing more of those outpatient procedures that are in demand and have a demonstrated record of success. “As we go forward, if we don’t partner effectively with hospital-based systems and providers, we both stand to lose,” Sweat says. “We don’t want the systems or our future partners to struggle, either financially or with performance standards, and one of the ways we do that is by trying to leverage our data, share information, and become a data-driven, techbased company. … Part of our collaboration with them helps drive the business where it needs to be.”
In a way, it’s an inversion of the traditional understanding of a business model with a goal of maximizing revenue. But health-care providers today, like the utility company that offers tips on energy efficiency, find themselves in the position of working with the customers to lower their overall spend, not increase it. And in some ways, it’s just getting started.
“It is safe to assume that we will see more of the same,” said Olathe Health’s Jensen. “In addition to the consumer desires and other needs, there are also tremendous advancements in technology and expertise that allow more procedures to be handled on an outpatient basis. As this continues, we will evolve along with that trend. At the same time, maintaining the high standards of care necessary for those more serious situations requiring hospitalbased emergency services and critical care in the hospital.”
“I think we’re going to see more and more outpatient services moving from the hospital to other sites of care,” said Shawnee Mission’s Harrold. “We all know in America the pressure to reduce costs, and that’s one way to do it.” But other ways will leverage that trend with improvements in population health management, she said, “and thinking more about chronic disease and how to keep people out of hospital and well, helping them with behavior change, and how we convey the message to people not just that they need to be healthy, but how to give them the tools to help them change behaviors.”
Those are trends that should be of interest to employers as well as consumers, executives say. “It’s not all that prevalent in Kansas City yet, but in other communities, we’ve seen a big rise in outpatient knee replacements,” said TMC’s Shields. “It used to be a three-day hospital stay; now, it’s down to a 12-hour stay. That will continue. So employers will continue to incent toward outpatient settings as they try to get more value out of their outpatient services. And as we continue to improve there, the ability to do even more in outpatient settings will only increase.”