Out­pa­tient rev­enue catch­ing up to in­pa­tient

Modern Healthcare - - News - By Tara Ban­now

THE GAP BE­TWEEN U.S. hos­pi­tals’ out­pa­tient and in­pa­tient rev­enue con­tin­ued to shrink in 2017 as more pa­tients elect to get care in cheaper out­pa­tient set­tings. Some ex­perts be­lieve a com­plete flip is in­evitable in the com­ing years.

The Amer­i­can Hos­pi­tal As­so­ci­a­tion’s 2019 Hos­pi­tal Sta­tis­tics re­port showed hos­pi­tals’ net out­pa­tient rev­enue was $472 bil­lion and in­pa­tient rev­enue to­taled nearly $498 bil­lion in 2017, the lat­est year for which the re­port has data, cre­at­ing a ra­tio of 95%, up from 83% in 2013.

“It cer­tainly re­flects con­tin­ued ef­forts from hos­pi­tals to make sure that peo­ple get the right care at the right time in the right set­ting,” said Aaron Wesolowski, the AHA’s vice pres­i­dent of pol­icy re­search and an­a­lyt­ics. “We’ve seen in­pa­tient uti­liza­tion drops in re­cent years and out­pa­tient has in­creased.”

Hos­pi­tal prof­its reached $88 bil­lion in 2017, a 12.5% in­crease over the pre­vi­ous year and a 27% in­crease from 2013. To­tal net rev­enue reached $1 tril­lion in 2017, up 0.2% com­pared with $998 bil­lion in 2016. Ex­penses dur­ing that time were $966 bil­lion, up 5% from $920 bil­lion. The AHA pro­vided Mod­ern Health­care with an ex­clu­sive copy of the re­port.

The jump in profit in 2017 was higher than in re­cent years. In 2016, prof­its in­creased 4%, com­pared with a 0.25% de­cline in 2015. Op­er­at­ing rev­enue in­creased just 4.6% in 2017, a lower rate than 2016 and 2015. Non-op­er­at­ing rev­enue, which in­cludes in­vest­ment in­come, jumped 92%, down from the 103% spike in 2016. Wesolowski at­trib­uted the slowed op­er­at­ing rev­enue growth to sta­bi­liz­ing uti­liza­tion.

“That’s cer­tainly a heavy driver,” he said.

The data il­lus­trate the con­tin­ued slow bleed of pa­tients out of hos­pi­tals. Ad­mis­sions to the 5,262 U.S. com­mu­nity hos­pi­tals and their nurs­ing home units in­creased by less than 1% to 34.3 mil­lion in 2017, from 34 mil­lion in 2016. (The AHA clas­si­fies non­fed­eral, short-term gen­eral and spe­cial hos­pi­tals as com­mu­nity hos­pi­tals.)

In­pa­tient days were largely un­changed at 186.2 mil­lion dur­ing that time. Both in­pa­tient surg­eries and births de­clined slightly from 2016 to 2017 to 9.1 mil­lion and 3.7 mil­lion, re­spec­tively.

But the grad­ual de­cline in in­pa­tient vol­umes didn’t trans­late into a sig­nif­i­cant out­pa­tient boost in 2017. Out­pa­tient surg­eries were mostly flat at 19 mil­lion, as were emer­gency room vis­its at 144.8 mil­lion. Out­pa­tient vis­its inched up by a mod­est 1.2% yearover-year, to 766 mil­lion in 2017. Those num­bers gen­er­ally in­clude ur­gent care and am­bu­la­tory surgery cen­ter vis­its, ex­cept for cases when the fa­cil­i­ties are not di­rectly af­fil­i­ated with a spe­cific hos­pi­tal, AHA spokes­woman Marie

John­son wrote in an email.

Even as out­pa­tient vol­umes were rel­a­tively flat year-over-year, net out­pa­tient rev­enue in­creased 5.7% from 2016 to 2017. It’s not sur­pris­ing to see out­pa­tient rev­enue grow as pro­ce­dures in­creas­ingly shift into out­pa­tient set­tings, said Chuck Als­durf, di­rec­tor of health­care fi­nance pol­icy and op­er­a­tional ini­tia­tives at the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion. He said part of that is driven by the CMS’ two-mid­night rule, cre­ated in 2013, which di­rects Medi­care con­trac­tors to deem a hos­pi­tal ad­mis­sion le­git­i­mate if it spans two mid­nights.

“Typ­i­cally when things move from in­pa­tient to out­pa­tient, es­pe­cially on a pro­ce­dural ba­sis, the charges go down, as well as the pay­ment,” Als­durf said.

He pre­dicts hos­pi­tals’ out­pa­tient rev­enue will even­tu­ally eclipse in­pa­tient rev­enue, but that’s still sev­eral years out.

Hos­pi­tals will also have to con­tend with the pos­si­bil­ity of lower re­im­burse­ment rates in some out­pa­tient set­tings. The CMS’ 2019 out­pa­tient pay­ment rule fi­nal­ized the con­tro­ver­sial site-neu­tral pol­icy, elim­i­nat­ing the rate dis­crep­ancy for hos­pi­tal-owned out­pa­tient de­part­ments and those owned by physi­cians. Hos­pi­tal groups, in­clud­ing the AHA, are su­ing to stop the pol­icy from tak­ing hold.

The amount hos­pi­tals re­ported hav­ing spent on un­com­pen­sated care was $38.4 bil­lion in 2017, the same as in 2016.

In to­tal, there were 6,210 hos­pi­tals in the U.S. in 2017, ac­cord­ing to the AHA’s data. That’s nearly 9% more than a decade ear­lier, when the U.S. had 5,708 hos­pi­tals, and slightly more than in 2016, when there were 6,168. The to­tal hos­pi­tals fig­ure in­cludes not-for-profit, in­vestor-owned, state and lo­cal govern­ment-owned hos­pi­tals and vet­er­ans hos­pi­tals.

The num­ber of ru­ral com­mu­nity hos­pi­tals de­clined nearly 8% from 2013 to 2017, to 1,875, while the num­ber of ur­ban hos­pi­tals in­creased nearly 2% dur­ing that time to 3,387.

Among com­mu­nity hos­pi­tals, 3,494 were part of a sys­tem in 2017, up from 3,467 in 2016 and 3,322 in 2013. Fewer hos­pi­tals were mem­bers of group pur­chas­ing or­ga­ni­za­tions in 2017 com­pared with 2016: 3,583 ver­sus 3,726.

The num­ber of full-time and part­time com­mu­nity hos­pi­tal em­ploy­ees in­creased slightly to 4.5 mil­lion and 1.6 mil­lion, re­spec­tively, in 2017.

Ad­justed ex­penses per in­pa­tient stay were higher at not-for-profit hos­pi­tals in 2017 com­pared with their in­vestor-owned coun­ter­parts. Not-for-prof­its spent $13,504 per in­pa­tient stay, while in­vestor-owned hos­pi­tals spent $10,273 for the same stay. That num­ber was even higher for state and lo­cal govern­ment hos­pi­tals: $14,015.

That’s not sur­pris­ing given in­vestor-owned hos­pi­tals have a com­pletely dif­fer­ent op­er­at­ing model, Als­durf said. They staff dif­fer­ently, and their scale al­lows them greater pur­chas­ing power and ef­fi­ciency. Plus, there’s pres­sure from Wall Street.

“I still think the big­gest rea­son is be­cause they’re run to make money for the in­vestors,” he said. “So there is a dif­fer­ent goal.” ●

GETTY IM­AGES

Ad­mis­sions to the 5,262 U.S. com­mu­nity hos­pi­tals and their nurs­ing home units in­creased by less than 1% to 34.3 mil­lion in 2017, from 34 mil­lion in 2016.

Out­pa­tient net rev­enue at hos­pi­tals is close to eclips­ing in­pa­tient net rev­enue ($ in bil­lions)

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