NO VA­CANCY

Empty beds and high over­head con­trib­ute to fi­nan­cial losses and re­vi­sions in cap­i­tal spend­ing plans

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Boul­der, Colo., may have more hospi­tal ca­pac­ity than it needs, but that did not stop con­struc­tion of a re­place­ment for Boul­der Com­mu­nity Hospi­tal with just as many beds as be­fore. That’s de­spite the fact the hospi­tal has seen con­sid­er­able growth in out­pa­tient ser­vices, in part thanks to a con­certed ef­fort to in­crease hir­ing of pri­mary-care doc­tors.

Nonethe­less, of­fi­cials scrapped plans to build a hospi­tal with 30 fewer beds on pro­jec­tions that a new lo­ca­tion and growth strat­egy would make cuts un­nec­es­sary, said Ron­ald Se­crist, pres­i­dent of the Boul­der Com­mu­nity Hospi­tal Foun­da­tion.

The project, which will cost $110 mil­lion and is sched­uled to open in mid-2014, will con­sol­i­date 170-bed Boul­der Com­mu­nity Hospi­tal’s cam­puses into one spot more cen­tral to lo­cal pop­u­la­tion growth, Se­crist said. Mean­while, ex­ec­u­tives will seek to cap­ture more mar­ket share in the treat­ment of can­cer and heart dis­ease, he said.

And hospi­tal of­fi­cials project that pop­u­la­tion growth will catch up, even­tu­ally, with hospi­tal ca­pac­ity, he said.

Boul­der Com­mu­nity Hospi­tal’s cal­cu­la­tion un­der­scores two com­pet­ing trends that have raised ques­tions about how many hospi­tal beds the na­tion needs: de­mo­graph­ics and the push to curb health spend­ing by treat­ing pa­tients any­where but costly hos­pi­tals.

The equa­tion is complicated by pol­icy changes un­der the Pa­tient Pro­tec­tion and Af­ford­able Care Act that will ex­pand in­sur­ance cov­er­age to mil­lions, should the Supreme Court up­hold the law (See re­lated story, p. 12). The law’s cov­er­age could give mil­lions greater ac­cess to health­care, but its fi­nan­cial in­cen­tives may leave some to seek care from emer­gency rooms rather than pri­mary care.

Also con­fus­ing pro­jec­tions for fu­ture hospi­tal ca­pac­ity is the eco­nomic re­bound. Hos­pi­tals across the na­tion re­ported lit­tle or no growth in ad­mis­sions in re­cent years as some house­holds lost in­sur­ance along with jobs. Es­ti­mates show the eco­nomic down­turn had a sig­nif­i­cant ef­fect on health spend­ing and in­sur­ance cov­er­age. U.S. health spend­ing in­creased at his­tor­i­cally slow rates in 2009 and

2010, the most re­cent fed­eral fig­ures show. And a re­cent Cen­ter for Study­ing Health Sys­tem Change anal­y­sis found em­ployer-spon­sored health in­sur­ance cov­er­age dropped 10 per­cent­age points among chil­dren and adults younger than 65 be­tween 2007 and 2010.

Pres­sure to keep pa­tients healthy

But some hospi­tal ex­ec­u­tives say that trend is likely to con­tinue, de­spite an eco­nomic re­bound, an ag­ing na­tion and po­ten­tially mil­lions of newly in­sured un­der health re­form.

That’s be­cause of in­cen­tives and ef­forts un­der way to treat pa­tients and pro­mote well­ness to pre­vent ex­pen­sive hospi­tal vis­its, ex­ec­u­tives said.

“You’ll need a lot fewer hos­pi­tals and hospi­tal beds” be­cause providers will do more to keep pa­tients healthy enough not to need them, said Frank Trem­bu­lak, ex­ec­u­tive vice pres­i­dent and chief op­er­at­ing of­fi­cer of Geisinger Health Sys­tem, Danville, Pa.

As a re­sult, hospi­tal of­fi­cials say they are look­ing closely at ca­pac­ity and cap­i­tal plans, and spend­ing has shifted to­ward out­pa­tient ser­vices.

Hospi­tal ad­mis­sions, which de­clined for sev­eral years start­ing in the early 1980s, have risen since the mid-1990s. But the av­er­age hospi­tal stay de­clined dur­ing that pe­riod as did the to­tal num­ber of hospi­tal beds, which dropped 13% be­tween 1990 and 2010, though that ap­pears to have plateaued in the past few years.

Mean­while, out­pa­tient ser­vices have grown steadily, with out­pa­tient vis­its in­creas­ing 116% dur­ing the same pe­riod.

As­cen­sion Health, the largest U.S. not-for­profit health sys­tem, has seen hospi­tal ad­mis­sions dip or re­main flat dur­ing the past three years, said Robert Henkel, the sys­tem’s pres­i­dent and CEO.

Henkel said that trend is ex­pected to con­tinue, with vari­a­tion by mar­ket, through the end of the decade, de­spite pop­u­la­tion growth. Based in St. Louis, As­cen­sion op­er­ates 76 hos­pi­tals in 14 states and the Dis­trict of Columbia. Tech­nol­ogy and in­cen­tives to treat pa­tients out­side the hospi­tal will re­duce hospi­tal ad­mis­sions, he said.

As­cen­sion con­stantly an­a­lyzes ca­pac­ity as trends change, he said.

The sys­tem will “con­tinue to be cau­tious” about ex­pand­ing its in­pa­tient ca­pac­ity, he said, and will look to in­vest more broadly in med­i­cal care out­side the hospi­tal.

That was the case with As­cen­sion’s Jan­uary ac­qui­si­tion of Alex­ian Broth­ers Health Sys­tem, based in Ar­ling­ton Heights, Ill., he said (See re­lated story, p. 10). Alex­ian op­er­ates more than just its three hos­pi­tals; the sys­tem also in­cludes mul­ti­ple am­bu­la­tory ser­vices for se­niors in­clud­ing home care and in­de­pen­dent liv­ing cen­ters, he said.

Catholic Health Ini­tia­tives has seen sim­i­lar changes to hospi­tal ad­mis­sions in re­cent years, with vol­ume flat or slightly lower, said Michael Rowan, ex­ec­u­tive vice pres­i­dent and COO for the sys­tem.

He at­trib­uted the stag­nant vol­ume to the eco­nomic down­turn, as house­holds strug­gled dur­ing the re­ces­sion or with health plans that shift more fi­nan­cial bur­den to pa­tients with higher co­pay­ments and de­ductibles.

Pro­jec­tions for the health sys­tem, one of the na­tion’s largest not-for-profit hospi­tal op­er­a­tors, show a slight drop in hospi­tal vol­ume af­ter 2016, af­ter an in­flux of newly in­sured pa­tients un­der health re­form, he said.

That slow­down will oc­cur as new pay­ment mod­els of­fer providers in­cen­tives to pro­mote preven­tion and dis­ease man­age­ment to keep pa­tients out of hos­pi­tals, he said.

In­sur­ers will end the prac­tice of pay­ing hos­pi­tals by vol­ume, he said. Un­der al­ter­na­tives that pay for med­i­cal care with a lump sum for a bun­dle of ser­vices, providers in­stead have an in­cen­tive to lower costs by keep­ing pa­tients out of ex­pen­sive hos­pi­tals.

Catholic Health Ini­tia­tives’ plans call for 65% of its rev­enue from pa­tients to come from care pro­vided out­side the hospi­tal by 2020. That fig­ure was 48% in 2010.

Rowan said that shift will lower the health sys­tem’s costs so that it can re­main com­pet­i­tive.

The sys­tem has boosted its physi­cian em­ploy­ment 53% to 2,300 doc­tors from 1,500 doc­tors a year ago. And in Oc­to­ber 2010, the sys­tem made a $43 mil­lion ac­qui­si­tion of home-care com­pany Con­sol­i­dated Health Ser­vices with the goal of ex­pand­ing the three­state com­pany to all 19 states where Catholic Health Ini­tia­tives op­er­ates.

Rowan said he can­not yet say whether the sys­tem op­er­ates more hospi­tal beds than needed, but cap­i­tal spend­ing has shifted sig­nif­i­cantly away from hospi­tal con­struc­tion and ren­o­va­tion and to­ward in­for­ma­tion tech­nol­ogy.

This year, con­struc­tion and ren­o­va­tion ac­counts for 22% of the sys­tem’s cap­i­tal bud­get, com­pared with roughly half of spend­ing dur­ing the last five years. Mean­while, in­for­ma­tion tech­nol­ogy, which makes up 21% of this year’s cap­i­tal bud­get, will ab­sorb from 40% to 50% of next year’s cap­i­tal in­vest­ments.

Not all hospi­tal con­struc­tion will cease. Some con­tinue to in­vest in new con­struc­tion to gain a com­pet­i­tive ad­van­tage de­spite ane­mic ad­mis­sions.

Ad­mis­sions stall

Stam­ford (Conn.) Hospi­tal has seen its in­pa­tient ad­mis­sions stall as its out­pa­tient ser­vices thrive, said Scott Orstad, a hospi­tal spokesman. “There is no ques­tion for us that the growth has been out­pa­tient,” he said.

Still, ex­ec­u­tives con­tinue to plan for a re­place­ment hospi­tal and one with the same ca­pac­ity. Orstad said the 305-bed hospi­tal op­er­ates in a com­pet­i­tive mar­ket with two nearby hos­pi­tals and enough com­muters to New York City that med­i­cal care there siphons away lo­cal pa­tients. The new hospi­tal

Stam­ford (Conn.) Hospi­tal has

plans for a re­place­ment hospi­tal, shown in a ren­der­ing here, with the same ca­pac­ity

as its cur­rent fa­cil­ity.

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