Clinical laboratories and pathology groups may need to re-strategize should hospital inpatient admission rates begin declining as a result of proactive clinical care programs
More hospitals are ramping up their services in proactive outpatient care. The goal is to reduce hospital admissions and curb costs. The challenge is that fewer admissions and shorter stays mean a drop in hospital revenues. For the hospitals’ clinical laboratories, it also means less inpatient lab test volumes.
Hospitals are doing this in response to changes in reimbursement models specifically designed to incentivize providers to keep people out of hospitals. Of all sites that deliver patient care, hospitals account for the greatest share of the nation’s healthcare dollar. This makes them a prime target for cost cutting, noted a recent story in Modern Healthcare (MH).
The story cited the California Public Employees’ Retirement System (CalPERS) and San Francisco-based hospital system Dignity Health (formerly Catholic Healthcare West) as examples of an employer organization teaming up with a health system to help providers become more assertive in providing proactive care in ways that will lower medical expenses.
By instituting a focused program of proactive care, CALPERs, in collaboration with Dignity Health, Hill Physicians, and Blue Cross Blue Shield of California were able to reduce inpatient admissions and inpatient days by a significant amount. CALPERs announced that it had seen a $15 million reduction in insurance rates during 2010 as a result of the greater emphasis on proactive care by participating partners. (Photo copyright Sacramento Bee.)
Collaborators in this effort include insurer Blue Shield of California and Hill Physicians in the care delivery model that is considered one of the early adopters of the accountable care reimbursement model (ACO).
The achievements are substantial. CalPERS provided this list of improvements in patient care:
- 50% drop in inpatient stays of 20 days or more.
- 15% drop in inpatient readmissions.
- 15% drop in inpatient days.
- 12% drop in average length of stay.
Pathologists and clinical laboratory administrators working at hospitals and health systems should recognize the implications of these reductions to utilization of inpatient hospital services. Multiply these achievements across thousands of hospitals in this country and it can be expected that fewer inpatient admissions and fewer inpatient days will result in noticeable declines in the volume of medical laboratory testing performed by hospital laboratories for their parent institutions.
By the end of 2010, CALPERs was reporting that this effort resulted in a $15 million drop in insurance rates. Most savings were attributed to fewer hospital admissions and shorter inpatient stays. However, it also meant millions of dollars less in revenue for the participating health system. “This is a tough transition time for these hospitals,” stated Kristen Miranda, Vice President of Provider Network Management at Blue Shield of California, in the MH story.
More Outpatient Care Leads to Fewer Hospitalizations and Lower Costs
Minneapolis-based Fairview Health Services, another Medicare “Pioneer” ACO, is an example of a multi-hospital health system that is successfully shifting care management to outpatient settings. According to MH, Fairview Health is rolling out initiatives to prevent hospital admissions for patients with congestive heart failure.
The University of Minnesota Physicians Heart at Fairview operates a heart-failure clinic dedicated to helping patients manage the chronic illness at home. Since the program began about eight years ago, for enrolled patients, repeat hospital visits for heart failure have dropped an impressive 67%!
A study published in the European Journal of Heart Failure echoed the benefits of intensive outpatient care. The authors wrote that expanding access to outpatient care can improve patient outcomes and substantially reduce hospital admissions and associated costs.
New Reimbursement Models Cause Hospitals to Rethink Revenue Strategies
Fewer inpatient admissions and shorter inpatient stays also mean lower revenues for hospitals. To offset losses, hospitals are scrambling to come up with strategies to shore up margins. Many executives say that efforts to lower operational costs will allow them to compete more aggressively and beat out rivals for a larger share of the market, MH reported.
Officials at North Shore-Long Island Jewish Health System are looking to make up some lost volume with market gains. “We think this is the only way to remain competitive and have a margin in the future,” stated Howard Gold, Senior Vice President of Revenue and Business Development for the health system that is based in Great Neck, New York.
According to the MH story, other strategies that hospital officials are adopting to ensure margins as competition among hospitals intensifies include:
- Become the sole hospital or health system within a specific health insurer’s network.
- Adopt analytical tools for cost-control efforts to target “highest spend” patients.
- Offset losses by serving communities with growing populations.
For its part, Fairview is looking to its outpatient initiatives to grow volume. “By improving access to care in our clinics, we have the opportunity to grow clinically appropriate patient volumes and referrals to our hospitals,” declared Terry Carroll, Senior Vice President for Transformation and Chief Information Officer at Fairview Health. Carroll noted that efforts to manage capacity have grown more critical.
Officials at three large Central Texas hospital systems agree. In a recent article in the Austin American-Statesman, hospital executives at Seton Healthcare Family, St. David’s HealthCare, and Scott & White acknowledged that the shifting healthcare landscape likely means slowing down robust expansions that have occurred in recent years.
“We can’t just keep building hospital beds,” observed J. James Rohack, M.D., FACC, FACP. He is the former president of the American Medical Association and Director of the Center for Healthcare Policy at Scott & White. “The nation has kind of signaled that we don’t want that to be a growth industry,” he added. Rohack is also Professor of Internal Medicine at Texas A&M Health Science Center College of Medicine.
“The next three to four years are going to be toughest on hospitals that survived on straightforward fee-for-service,” Blue Shield’s Miranda stated.
Experts clearly agree that the shifting healthcare terrain will produce both winners and losers. This is why clinical laboratory managers and pathologists are seeing office-based physicians and hospitals in cities across the United States coming together in an effort to create organizations that want to deliver integrated clinical care.
—Pamela Scherer McLeod
Related Information:
Area hospitals devising ways to keep patients out
CalPERS says it saved $15M with ACO pilot program, will likely expand it
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