Indy hospitals continue to see fewer patients. Why?

After a decades-long binge, we’re all of a sudden buying less health care. Is that because we’ve kicked the habit, sobered up and found religion? Or is it the Great Recession hangover that will pass, eventually, so we can all get back to the party?

Those are the questions the leaders of Indianapolis-area health systems continue to ask themselves as more data roll in showing that fewer patients are showing up at their doors this year, just as happened in the second half of last year.

Consider IU Health’s first quarter, compared with the same quarter last year:

-          Inpatient admissions fell 9.8 percent.
-          Inpatient surgeries declined 7.1 percent.
-          Outpatient surgeries dropped 8.5 percent.
-          ER visits fell 10.4 percent.
-          Imaging fell 5.4 percent.

Now look at Community Health Network’s first-quarter experience versus the year-ago quarter:

-          Inpatient admissions fell 3.9 percent.
-          Inpatient surgeries declined 2.3 percent.
-          Outpatient surgeries fell 5.5 percent.
-          ER visits ticked down 1.2 percent.
-          Imaging increased slightly by 0.4 percent. 

Now look at the first-quarter results of Riverview Health in Hamilton County

-          Inpatient admissions declined 14.1 percent.
-          Inpatient surgeries slid 14.9 percent.
-          Outpatient surgeries fell 11.2 percent.
-          ER visits dropped 14.3 percent.

In Indianapolis, these declines came on hospitals suddenly in the middle of last year, and prompted the largest systems in Indianapolis to lay off hundreds of workers.

“We were celebrating our successes through June of 2013,” said Larry Heydon, CEO of Johnson Memorial Hospital in Franklin, which does not report quarterly results publicly. “Where previously, we could count on growth in volume, we no longer can.”

A slowdown in health care spending—markedly different from the previous four decades—is playing out national, too.

Use of health care services dropped at an annual rate of 1.4 percent in the first quarter compared with the fourth quarter of 2013, according to a June report by the Bureau of Economic Analysis.

So what in the world is happening? There are three main reasons for this stunning slowdown in health care.

1.       Competition. Heydon, the CEO at Johnson Memorial, said Johnson Memorial’s patients are increasingly going to non-hospital providers for blood tests, imaging procedures and other “ancillary” services. As I’ve noted before, hospitals make tons of money on these procedures. But employers and insurers have made a concerted effort to give their workers information on the cost differences between hospital-owned and non-hospital facilities. And they seem to be responding.

“What’s hurting the hospitals are those baseline procedures: those imaging procedures, those lab procedures,” Heydon said. “Niche providers are coming in and providing those services at much lower cost.”

2.       Patients avoiding care. More patients have high-deductible health plans. I have one. And my family has absolutely ignored referrals to specialists and imaging appointments to instead “wait and see.” Apparently, we’re not alone. Heydon says he sees patients skip some of their diagnostic tests or skip rehab therapy sessions at a hospital facility after a surgery.

3.       Doctors practicing differently. Obamacare unleashed a bunch of experiments in tying payments for medical care to doctors’ success at keeping patients out of the hospital, something called “population health” or “accountable care.” These various programs still don’t amount to a significant percentage of hospitals’ revenue, which has led me to be skeptical of their impact on the market. But others disagree.

AnnJeanette Colwell, a market analyst for HealthLeaders–InterStudy, told me that she thought the move to new “accountable care” contracts was having a significant effect in the Indianapolis market, just because hospitals systems started moving that direction five years ago—rather than waiting, as other markets did, for the U.S. Supreme Court to render its 2012 judgment on the constitutionality of Obamacare.

“Population health management strategies are becoming popular among Indianapolis health systems, and we expect to see additional [accountable care] agreements formed in the coming years,” Colwell wrote in a recent report on the Indianapolis market.

This is not where health care was supposed to be. If anything, the retirement of baby boomers was supposed to create a surge of demand for health care.

But so far, the major changes to health care finance—consumer-driven health plans, competitors seeking to capitalize on price transparency, as well population health and accountable care contracts—seem to be getting the upper hand.