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Health Care & Life Sciences / Life Science & Biotech

OK, I’m convinced: Hospitals actually are transforming

January 15, 2014
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I’ll admit it. I’ve been highly skeptical of Indianapolis-area hospitals’ talk these past four years about transforming health care via coordinated care, accountable care, medical homes, pay-for-value arrangements, and whatever other buzzwords have been thrown about.

I was skeptical for three main reasons.

First, the accountable care movement is, by and large, a rerun of the HMO movement of the late-80s and early-90s. That movement did dramatically slow health care spending for a couple years. But then it was almost entirely unwound here in central Indiana. Why? Patients didn’t like it and hospitals and doctors lost money on it. I didn’t expect the sequel to end up much different.

Second, hospitals talked about coordinated care and accountable care most when they were announcing their myriad acquisitions of physician practices, especially their high-value surgical specialists. So as hospitals worked feverishly to secure their old business model—the referral sources that keep their operating rooms and hospital beds full—they declared they were ushering in a new age of health care. Riiiiight.

Third, only two Indianapolis-area hospital systems joined the Medicare shared savings program, which promises to split savings from reducing the amount of care delivered. And while Indianapolis-based health insurer WellPoint Inc. has been forming similar, accountable care-style contracts with hospital systems around the country, it has announced nothing like that here.

But I’m beginning to be convinced that hospitals are, in fact, changing how they operate. Or, at the very least, they are finally realizing they have no other option than to change how they operate.

For the best explanation of the evidence that hospitals are charting a new course, read this fascinating study by Kaufman Hall & Associates, a Chicago-based hospital consulting firm.

The study found that, among Chicago-area hospitals, inpatient admissions declined between 2010 and 2012 for nearly every hospital service line. The steepest declines have been among Medicare patients, whose coverage should be the least impacted by the recession and its aftermath. Only 9 percent of the declines can be attributed to hospitals not admitting patients for an overnight stay, but instead placing them on “observation status.” And inpatient declines have been greater for patients that should not wind up in the hospital—patients with chronic, but manageable conditions like diabetes and heart disease.

“These data signal,” wrote Kaufman consultants Robert York, Kenneth Kaufman and Mark Grube, “that doctors and hospitals have started to change the way they care for patients.”

The Kaufman consultants, which do a lot of work with Indianapolis-area hospitals, suggest their analysis is applicable nationally. In an e-mail, Grube told me the same trend is playing out in Indianapolis, although at a slower pace because no major provider has a significant chunk of its business in a shared savings or capitated risk contract.

“We believe that the pace of the decline [in hospital visits] accelerates when providers, including physicians and hospitals, have economic incentives to eliminate unnecessary care, deliver care in lower cost settings, and manage utilization more carefully,” Grube wrote.

But I would say there are signs that Indianapolis-area hospitals are changing from their old model of "more, more, more" to a new model that focuses on keeping patients healthy first and focuses on filling beds second.

Consider that the layoffs last year by St. Vincent Health, Indiana University Health and Franciscan Alliance were three of the five largest layoffs in the nation last year.

Consider that all of those hospital systems saw declines in key areas of their business last year, as I have written about before.

I also find it interesting that IU Health, which had been the most aggressive (some would say egregious) builder of new facilities in the previous decade, has apparently changed its playbook. Nearly a year ago, IU Health halted its plans to build a new bed tower at Methodist Hospital. When was the last time you heard of that happening?

Also, it’s interesting to note what hasn’t happened at the IU Health West hospital, even though that facility is running near capacity in its core units. In 2012, IU Health West recorded patient-days in its medical-surgical unit that slightly exceeded its med-surge capacity for the year. IU Health West was also at 94 percent capacity in its obstetrics beds.

Yet IU Health is not building a new bed tower in Avon. Instead, I’m told, it is trying to figure out how to send more west side patients to its other facilities, which do not have occupancy as high as IU Health West.

So there you have it. Even though I was pretty hard on the local hospitals last year for being overpriced, overbuilt, overstaffed and, in general, as focused on making money as any publicly traded corporation, I see that they are starting to change.

That’s far from saying they are already transformed. So I'm sure you'll read more critical content about hospitals on this blog in the future. But I’m eager to cover this transformation throughout this new year. And, most likely, the next several years, too.

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