As Highmark announces several new hospitals, more than a quarter of the health system’s beds are empty.
Pittsburgh Post-Gazette
Highmark Health is planning to build a 160-bed hospital in Pine, plus “multiple” smaller hospitals at a time when more than a quarter of the Pittsburgh-based health system’s hospital beds are empty.
Allegheny Health Network’s overall hospital occupancy rate for 2016 was 66.9 percent, down from 68 percent in 2015, the health system reported in February.
The state Health Department said the number of patients in hospital beds was just 43.5 percent last year at AHN’s Canonsburg Hospital in Washington County. West Penn Hospital’s occupancy rate was 65 percent, while Jefferson Hospital had 52.8 percent of its beds filled.
Highmark has not disclosed the location or details of four planned “neighborhood hospitals” that were part of Wednesday’s announcement. Those will contain 10 to 12 beds each and offer emergency care and other services.
AHN spokesman Dan Laurent said the additional hospital beds were in response to patient needs in certain areas.
“This is not about putting more beds in the market, but rather putting the right kind of beds in the right places,” Mr. Laurent said. “A lot of careful deliberation is going into where the facilities will be located, and we anticipate a continuing increase in demand for AHN services.”
One community hospital official questioned the need for more hospital beds in the region.
“We view it as a duplication of resources,” said Bob Rogalski, CEO of Greensburg-based hospital system Excela Health. “You just raised the cost of providing care for the whole region. Somebody has to fill those beds, but we’re ready to competewith them.”
Occupancy rates at Excela’s three acute-care hospitals ranged between 62.5 percent and 70 percent in 2016, according to the state Health Department.
The microhospitals that AHN envisions typically cost between $7 million and $30 million to build, significantly less than a community hospital, while they can bill at the same rates as a full-service hospital, according to an analysis by Chicago-Ill.-based MB Financial Bank. Moreover, a microhospital’s overhead is much less than a full-service hospital, which translates into a higher operating margin.
Pennsylvania hasn’t regulated hospital construction and other big medical expenditures since the state certificate-of-need law expired in 1996. That set off a boom in medical building construction, equipment purchases and services.
Critics say consumers wind up footing the bill for duplicative construction projects in the form of higher insurance rates and medical bills, but the emptybed problem is bigger than AHN.
Heritage Valley Sewickley’s occupancy rate in 2016 just topped half at 50.2 percent, according to health department figures, while St. Clair Hospital in Mt. Lebanon had an occupancy rate of 60.3 percent. Armstrong County Memorial Hospital in Kittanning had among the lowest occupancy rates in the region: 38.9 percent, according to the state Health Department.
UPMC, which already operates more than two dozen hospitals statewide, met with Jefferson Hills Borough officials in the past month with preliminary plans for a hospital off Elliot Road at the site of a former drive-in theater.
No other details were available, borough officials said, but the Jefferson Hills proposal follows UPMC’s decision to abandon a site for a new hospital in South Fayette, which would have had 90 beds and cost $211.2 million.
Occupancy rates at UPMC’s hospitals in its core Allegheny County market range between 68.3 percent at UPMC East in Monroeville to 79.8 percent at UPMC Presbyterian Shadyside, two hospitals grouped under a single banner.
New hospital construction in Western Pennsylvania is happening even as health care overall is moving out of hospitals and into the community in ambulatory care centers, like the 59,000-square-foot center proposed by Heritage Valley in Center Township. Four outpatient surgical suites, doctors’ offices and other medical services will be available at the center, which is expected to open in early 2019.
Outpatient medical care generally costs less, and is considered safer and more convenient for the patient.
Ken Melani, general partner at O’Hara-based private equity firm Velocity Fund Partners, attributed the outpatient medical trend to advancements in medicines, technology and how care is provided, including cancer therapy, which less often requires a hospital visit.
“The dynamics of the whole industry are changing, so you don’t need the use of inpatient beds,” said Dr. Melani, a former Highmark CEO who was not briefed on the system’s construction plans. “There probably won’t be a need for as many acute care beds in the future.”