One of the architects of the Affordable Care Act, Ezekiel Emanuel, has famously said, “We don’t need 5000 hospitals.” For several years, the number of inpatient admissions has been declining, and that trend is not likely to change. According to the American Hospital Association, 27 hospitals permanently closed their doors in 2014. Inpatient days have declined by 5% over a recent 4 year period, and the US hospital occupancy rate is down to 60%. There are myriad reasons for this decline, including the shift to outpatient centers for many procedures, fewer elective surgeries, declining length of stay, and more patient awareness of other options.
Other factors include the readmission penalties instituted by CMS, the increase in “observation” stays, and the growth of high deductible health plans with the resulting shift of costs to employees. A newer driver of the fall in hospital days and services utilization is the move from Fee for Service (FFS) to more shared risk/reward strategies. As Accountable Care Organizations (ACOs) and similar arrangements become larger and more prevalent, hospitals will see payment reform impacting all lines of services. Under the FFS form of payment, high tech services were revenue generators, and hospitals were incented to build more MRIs and cardiac catheterization labs. Due to payment reforms, these services now are cost centers, and hospitals are urgently seeking new ways to manage their costs.
Many communities across the country have an excess number of beds given the falling demand, so hospitals will find other uses for these extra beds – or close them. Shedding unneeded capacity should help hospitals run more efficiently and decrease redundancies in many markets. Hospitals can use data to decide how many services are needed, and can build facilities based on need, rather than as a revenue driver. Hospitals need more data to understand the market they serve, to analyze the efficiency of the services they provide and the quality of the service lines they do keep.
An article in the Archives of Internal Medicine looked at non-emergency cardiac stent placement. In this report two cardiologists reviewed the records of 7000 patients who had stents placed as part of 8 different clinical trials. That analysis suggested nearly 2/3 of the stents placed were not needed – which is both a cost and a quality issue. A Truven Health analysis found nearly 30% of the medical spend in the US was unnecessary. Payment reform under the Affordable Care Act is designed to lessen the burden of unneeded care, and as the healthcare delivery system becomes more efficient, the need for hospitals will continue to decline. As hospitals become more efficient, driving out waste and improving quality, we may see the cost curve stabilize and even “bend” in the right direction.
Michael L. Taylor, MD, FACP
Chief Medical Officer