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.

  • Medical Bills Are Still Killing Us
    JK - There is still ample low hanging fruit to bring down hospital costs and prices. The market is still a crapshoot for patient and consumers whether one has or does not have insurance. The core problem is still lopsided pricing and oversized profits in a market that does not work. Yes, this sounds like an exaggeration but...please take time to read Steve Brill's article, Why Medical Bills Are Killing Us, which was published in the March 4, 2013 issue of Time Magazine. I read it when it was first published and just reread it again in light of all the attention and misinformation about the ACA, Medicare, Medicaid, and the medical device tax. To me, the article was eye-popping with regard to getting insights and understanding about the dysfunctional and overpriced US health care system. The article is lengthy but delves deeper into the system that encompasses over one-fifth of the US economy; it has four parts: (1) the high cost of routine care, (2) the perverse economics behind medical technology, (3) the unbelievable costs of catastrophic care, and (4) the overall costs to taxpayers. The article also offers some insightful conclusions and puts the administration of Medicare into better perspective. If you have already read the article, I urge you, as well as other readers of your column, to read it again. I realize the article uses anecdotal information to make many of its points, but the anecdotes are powerful and will generate a lot of thought about the economics and continuing problems with our health care system today and why the ACA only nibbles around the edges of the core problems. Thanks for considering my comments.
  • Rx for healthcare - common sense
    “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." Economic incentives? This has to be the only industry besides government that gets paid more to do less. We pay more and more in insurance to cover the "rising healthcare costs" and they spend it in "incentives" to not treat us. How does that work? And how do we ca$h in on it? It's possible the declining rates aren't so much about industry changes. Perhaps there are just more patients like me - who get tired of running appointments and paying our hard earned money only to be told the same old "don't smoke or drink, eat healthier get lots of sleep and exercise". And I should reschedule why??? While that is good advice and those are all important - it isn't the solution to every problem for every patient. I think it's entirely plausible that many, like me, have just given up until we're actually dying or break something. Perhaps healthcare wouldn't be so expensive if 1. The malpractice suits were regulated instead of our "care". 2. Doctors could actually have more than 5 min in front of each patient (and actually spent it listening to them instead of checking documentation in the EMR the whole time.) 3. Medical personnel would get proactive about malpractice suits by diligently trying to give each patient the best attention and care, instead of spending that time covering their butts with documentation. I'm sorry but you can write whatever you want in my chart; it still doesn't make it factual, nor does it replace paying attention and listening to the patient. 4. Patients weren't forced to complain about long term problems for numerous years before doctors finally realize that yes, there might actually be something wrong with this patient. By that point, diseases have progressed causing more extensive, expensive problems. What is the point of "spreading awareness" when those who are supposed to help us won't listen or do anything about it? A lovely "cherry on top" of this scenario is the depression that results from seeking help,then being denied and belittled (how dare we presume to know our bodies better than Dr Knowitall?). Of course, then every issue we have is attributed to the depression. Or the med cocktail they give to treat it, and then the side effects from same meds, or the meds prescribed for the side effects. 5. Primary care physicians were compensated better than specialists. After all, they're usually the ones coordinating our care and expected to know about every disease or disorder of every system. That's just not possible, especially when they have to see the amount of patients they do. 6. There were systemic specialists for the many who are dealing with body wide issues. Let's take lupus for example. It's entirely possible, and probable, that a lupus patient could be dealing with primary care, immunology, rheumatology, cardiology, pulmonology, gastroenterology, dermatology and so on and so on. That does not equal best care, best interests of the patient (who is probably doing all they can to make it to one appt), or financial feasibility. 7. Insurance companies didn't dictate the order of procedures. In an idealistic scenario, a patient presenting with a textbook illness should be able to have it recognized, diagnosed and treated as such, without the time, cost and hassle of going through numerous "rule out" tests and/or procedures. Yes there are many areas where that is necessary and with good reason, but also many where it isn't. Unless the insurance companies saving a dollar or two is considered "good reason". I could elaborate so much further but I have a life to get to. One that has spent enough time deliberating the reasons why healthcare costs so much, why my doctors want me to pay them for not listening to or helping me, and what the possible solutions are. It's not like anyone in the industry really wants to hear my ideas anyway. They would be too simple, with too much common sense, and not enough loopholes for the greedy to take advantage of. I think the biggest contributor to the high costs is the pharmaceutical companies. Not worth going deeper with that, but felt it should be mentioned as they are in this from the beginning to the end. Thanks for letting me comment. Hopefully anything I've shared has started turning wheels instead of offending because no offense is meant to any person or profession. I've had some really horrible doctors, but I've also had some phenomenal ones. At the end of the day, we're all human.
  • Response to Sarah
    Sarah - I urge you to read the article I noted in my comment above. It is Steve Brill's article, Why Medical Bills Are Killing Us, which was published in the March 4, 2013 issue of Time Magazine. I think it will further illuminate many of the points you made in your comment. It also offers up some solutions but notes that the current system has many disincentives to render the solutions dead on arrival due to the influence of lobbyists and pharmaceuticals, among others, that like the current system.
  • Yeah righ
    Got it right?! Not quite. I get that the hospitals may have been over staffed, but cutting vital positions within them and giving ALL of those responsibilities to the already overworked bed side staff (while simultaneously forcing unsafe nurse to patient ratios) isn't the answer. Maybe it helped save some bucks. Great. At the end of the day, people will end up likely staying home to die of a broken leg than get overcharged for a hospital bed they get a UTI and infection from where they see an RN every 4-6 hours because they have so many other patients to take care of. Let me just stop here to applaud the genius that thought that was a great solution. PS - Big thanks to the governor for pulling so much funding from health care, also. Bravo! As if it's hard enough working in health care, we get less money for more work and to deliver unsafe patient care. Dream job come true ...

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  1. Aaron is my fav!

  2. Let's see... $25M construction cost, they get $7.5M back from federal taxpayers, they're exempt from business property tax and use tax so that's about $2.5M PER YEAR they don't have to pay, permitting fees are cut in half for such projects, IPL will give them $4K under an incentive program, and under IPL's VFIT they'll be selling the power to IPL at 20 cents / kwh, nearly triple what a gas plant gets, about $6M / year for the 150-acre combined farms, and all of which is passed on to IPL customers. No jobs will be created either other than an handful of installers for a few weeks. Now here's the fun part...the panels (from CHINA) only cost about $5M on Alibaba, so where's the rest of the $25M going? Are they marking up the price to drive up the federal rebate? Indy Airport Solar Partners II LLC is owned by local firms Johnson-Melloh Solutions and Telemon Corp. They'll gross $6M / year in triple-rate power revenue, get another $12M next year from taxpayers for this new farm, on top of the $12M they got from taxpayers this year for the first farm, and have only laid out about $10-12M in materials plus installation labor for both farms combined, and $500K / year in annual land lease for both farms (est.). Over 15 years, that's over $70M net profit on a $12M investment, all from our wallets. What a boondoggle. It's time to wise up and give Thorium Energy your serious consideration. See http://energyfromthorium.com to learn more.

  3. Markus, I don't think a $2 Billion dollar surplus qualifies as saying we are out of money. Privatization does work. The government should only do what private industry can't or won't. What is proven is that any time the government tries to do something it costs more, comes in late and usually is lower quality.

  4. Some of the licenses that were added during Daniels' administration, such as requiring waiter/waitresses to be licensed to serve alcohol, are simply a way to generate revenue. At $35/server every 3 years, the state is generating millions of dollars on the backs of people who really need/want to work.

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