NO VACANCY
Empty beds and high overhead contribute to financial losses and revisions in capital spending plans
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