Slowdown in hospital admissions could be the new norm
The surge in hospital admissions due to expanded coverage under the Affordable Care Act appears to be tapering off. While admissions rose 3% to 4% annually in the years immediately after the ACA was enacted, the rate has slowed to 1% to 2% in recent months as the number of newly insured has flattened and the reliance on high-deductible plans has grown.
As evidenced by the rough second quarter at most hospital systems, the “new normal” of 1% to 2% might be optimistic. Giants HCA, Community Health Systems, Tenet Healthcare Corp. and LifePoint Health felt the sting of flat to lower admissions in the quarter, causing earnings declines. They also all cut earnings guidance for the year.
The few not-for-profit hospital systems that disclosed their results last week fared little better. Fourteen-hospital Indiana University Health posted a 46% drop in operating income in the quarter on a year-over-year admissions decline of 2%.
WellStar Health System of Marietta, Ga., saw flat admissions across its 11 hospitals for its fiscal year ended June 30, though six hospitals acquired a year ago drew down the average, said Carrie Owen Plietz, chief operating officer of WellStar’s hospital division. That said, operating margins for the system’s hospitals rose a notch to a respectable 4.7% from 4.6% the year earlier on strong cost controls and a higher-acuity case mix.
“Times are still pretty good for hospitals but the writing is on the wall,” said Paul Hughes-Cromwick, co-founder of the Alta- rum Institute’s Center for Sustainable Health Spending in Ann Arbor, Mich.
Tenet President of Hospital Operations Eric Evans blamed the system’s 1% decline in second-quarter admissions on high deductible plans, fewer births at Tenet hospitals and some lost business because Tenet was an out-of-network provider for Humana for part of the quarter.
“In the last couple of years, deductibles in many cases have risen by as much as 30%, and that is changing how people access care, at least in the short run,” Evans told analysts during Tenet’s earnings call Tuesday. Tenet is the nation’s third-largest investor-owned hospital chain with 77 hospitals.
Evans said volumes are holding up in the critical specialties, such as cardiology and neurology. Those are areas that Tenet has been aggressively strengthening, including recently finishing four major hospital expansion projects in Detroit, San Antonio, El Paso, Texas and Delray Beach, Fla.
But fewer elective surgeries and procedures are dampening volumes, partially driven by consumers deciding whether they can afford them.
In 2016, for the first time, more than half of all workers with single coverage (51%) faced a deductible of at least $1,000, according to a study released last September by the Kaiser Family Foundation/Health Research & Educational Trust. The study showed that 29% of workers were in high-deductible plans compared with 20% two years earlier.
Hospital systems are combating high deductibles and consumer price-shopping by expanding ambulatory-care points and making sure they have hospital specialties to capture sicker patients.
Dallas-based Tenet has 99 urgent-care centers and 19 free-standing emergency departments in its major markets today compared with 52 and 15, respectively, in 2014. Moreover, the system is trying to leverage the $2 billion-plus majority acquisition of giant United Surgical Partners International in 2015 to offer more ambulatory surgery options in its hospital markets and grow that business outside those markets.
WellStar is adding physicians in its Georgia markets and has built four comprehensive health parks around its hospitals to offer nearly every service short of inpatient care, including diagnostics, therapy and even healthy cooking classes, Owen Plietz said. The health system is also having success drawing in patients with daily or weekly healthcare specials.
For example, for a limited time, WellStar is offering coronary calcium scans for $99 for individuals or $149 for a couple. The tests are cash-only and not subject to insurance claims. Then there’s “Think Pink Thursday” and “Walk In Wednesday” where patients can walk in for mammograms at two health parks.
Source: Compiled by Modern Healthcare from Q2 financial filings