Why are we still building so many beds??

Tuesday, March 7, 2017 | Joel Sauer

 

For the past decade we have anticipated and watched our patient populations and reimbursements switch from the inpatient setting to the outpatient. In cardiology, catheterizations made that transition years ago and now have elective PCIs and several EP procedures. At the same time, our senior populations have swelled and chronic disease prevalence continues to rise, expanding our office volumes.

So why is it that as I travel the country I see major investment — measured in the tens to hundreds of millions of dollars — in inpatient towers and mega campus facilities? Why do I see very little capital investment and often no strategy around the ambulatory setting?

I suppose free standing ERs can be considered ambulatory settings, but seem very much like an inpatient-focused, fee-for-service play designed to fill beds at a time when bed utilization is projected to decline. Additionally, ERs are one of the most expensive care settings in all of health care, and value reimbursement—barreling down the highway—rewards cost efficiency. I’m sure there are compelling reasons for these inpatient investments, but is this a smart use of scarce capital resources long term?

Despite reimbursement changes, these outpatient procedures are still predominantly performed in the same inpatient facilities they have been for the past 10 - 30 years. In many instances our processes, staffing and post-procedure pathways are exactly the same. Given that outpatient reimbursement for these procedures is universally lower than the corresponding inpatient rates, these procedures must be putting financial strains on our organizations. If that’s not the case, it will be. At the very least we’re leaving margins on the table.

 

 Beyond the financial performance, there’s patient experience — still very important in Value Based Purchasing and prominent in the final rules for Episode Payment Models (EPMs), or Bundles. It is extremely hard to maintain top experience ratings for outpatient populations in mega campus settings that typically include parking hassles, long walks and a hectic environment.

Today hospital outpatient department (HOPD) rates are significantly higher — often as much as three times — than the same services rendered in a physician office, surgery center or imaging center. With its Site of Service ruling in November, 2016, CMS put a ban on converting formerly outpatient services to HOPD, or adding new HOPD facilities, unless still contained in the hospital walls. So, investment in convenient, patient-centered ambulatory centers would have to be made by moving lucrative outpatient services into an environment with much lower reimbursement (revenue) support. Although probably not intended, this change creates a significant disincentive for investments outside the hospital walls.

To be fair, the Site of Service Rule is relatively recent and the trend toward outpatient has been around for quite some time so, as usual, there’s more to the story. Part of that “more” is the duplication of relatively expensive staffing resources that an ambulatory center would create. For instance, cardiology imaging is still often utilized for hospital inpatients.

Making these modalities part of a convenient off-site ambulatory center does not obviate the need to maintain duplicative services in the hospital. Not only does this require replicated expensive capital resources, it also requires redundant staff – staff that tend to be relatively scarce and highly compensated. I’ve seen attempts to use ambulatory testing facilities, such as those in an adjacent medical office building, for inpatient services. The result, however, is awkward logistics such as wheeling patients through main lobbies (yes, I’ve seen this) or across sky bridges on gurneys complete with fluid poles. This is not a process that will lead to higher patient satisfaction scores, nor is it something we can look someone in the eye and call “patient centered.”

Although the current reimbursement climate already promotes efficient utilization of facilities and staff, innovative strategies like EPMs will greatly increase the urgency. Now all of sudden the services rendered by a health system – and beyond – will be considered costs and measured against like peer groups. Decisions to move services to higher reimbursement environments look a lot different in this cost accountable model.

Most predict that inpatient volumes will continue to decline during the next 10 years, while outpatient volumes will rise by double-digit percentages.

All the pundits agree the migration of inpatient services to the ambulatory setting will expand. In fact, most predict that inpatient volumes will continue to decline during the next 10 years, while outpatient volumes will rise by double-digit percentages. We would probably be challenged to dream what current services will eventually be rendered in the outpatient setting; who would have thought total knees could be done as outpatients.

Are health system decision processes so mired in bureaucracy and slow that today’s decisions are based on yesterday’s reality?  If this is the case, the consequences can be quite disastrous and hamper performance for years or decades to come.

It seems prudent for health systems to spend some intentional time and focus – and capital – on developing a comprehensive ambulatory strategy. It is likely that reimbursement for health care will continue to reward providers for keeping patients healthy and out of inpatient facilities. At present, there just isn’t enough ambulatory coordination and integration to do this well and we have only begun to scratch the surface in leveraging telehealth and new technologies that can dramatically lower the cost of care.

To wrap up, I believe that whoever gets the ambulatory piece figured out — not build the most private beds and tallest tower — will be the big winner. Unfortunately at present, this side of health care seems to be an afterthought.

 

Illustration: Lee Sauer

---

Joel Sauer, Vice President, MedAxiom Consulting, works with cardiovascular practices and programs across the country to prepare them for the value economy. His work includes vision and strategy setting, creating and implementing effective governance and leadership structures, co-management development, joint venture and other innovative partnerships, and provider compensation plan design. Joel has a wealth of experience in service line development, clinical strategy development, provider workforce planning, MACRA and EPM planning, and operational assessments.

---