Inpatient utilization decreased at not-for-profit hospitals in the first half of this year while outpatient utilization increased, according to a recent survey by management consulting firm Kaufman Hall.
The survey results reflect the ongoing transformation of the healthcare system away from fee-for-service payment models that emphasize and reward inpatient care and toward a more value-based, lower-intensity care system.
Inpatient utilization was flat or declined in the first half of 2014 for 68 percent of respondents to Kaufman Hall’s survey of its own not-for-profit hospital clients, with emergency department use flat or dropping for 60 percent of respondents.
Meanwhile, 72 percent of respondents said outpatient utilization had increased in the first two quarters of 2014.
[See also: Inpatient stays drive price variation.]
While reducing reliance on expensive inpatient care is a noble and sensible goal, the transition away from a bricks-and-mortar, fee-for-service model is creating tremendous pressures for hospitals and their chief financial officers.
Efforts toward “taking inpatient utilization out of the system “obviously challenges everything we’ve known in the industry from the hospital side for the last 30 years, which is the tenure of a lot of the CFOs out there,” according to Kaufman Hall senior vice president Robert York. “When you seek to serve inpatients, and all your payments are based on that, and you’ve got this tremendously expensive 24/7 fixed-cost structure, that’s pretty disruptive.”
Slow uptake of value-based care
Even though inpatient utilizations – and the reimbursements that accompany them – are trending down rapidly, the survey shows that adoption of value-based payment models is lagging. About 6 percent of respondents report that value-based payments comprised more than half their revenue in the first six months of the year.
The vast majority of respondents – nearly 80 percent – reported that less than 10 percent of their revenue in the first two quarters came from value-based contracts. However, nearly 40 percent of respondents said they anticipated generating at least 20 percent of their revenue over the next 24 months through value-based contracts.
“In a lot of those models, the use of the hospital or inpatient care is considered a failure. Nobody wants to be in the hospital,” said York. “That’s a huge strategy shift for organizations that are carrying the hospital legacy model into the future and trying to figure out how to get customers, that patient base, to support what they’ve already built, and then they still have to grow.”
Despite the relatively slow adoption of value-based care, “for the most part we’re still experiencing as an industry the deterioration of the fee-for-service inpatient model,” York said.
“We’re starting to see kinds of models evolve around no doctors – leveraging Skype to do primary care visits, having mobile e-visits, taking pictures on your cellphone for dermatology – that don’t include any bricks and mortar,” he said. “It’s having a huge impact on the current model and also the reimbursement.”
The challenge for CFOs, York says, “is determining where your payment stream will be coming from in the future, how much of your business is value-based, and where that is headed.”