Shedding Light On Hospital Use

June 1, 2007
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GRAND RAPIDS — Midnight. That's the hour of power for hospital occupancy rates. Everything else is up for debate: the number of licensed beds versus the number of beds in use; what types of patients use the beds; the day of the week; the time of day or year; and even the actual occupancy rate.

But at midnight every day, patients in beds are counted and a number is recorded.

"It's a measurement tool," said Saint Mary's Health Care CFO Steve Pirog.

"We don't look as much at occupancy as a measure of performance, because occupancy is a calculation of patient loads. We really look at the components that make up occupancy. We spend more time measuring discharges and the length of stay that a patient stays in the hospital. We spend more time on the foundation things we can impact than on what occupancy is per se. Occupancy comes into play more for nursing in getting a good handle on staffing requirements."

Dan Holwerda, executive vice president and COO at Metro Health Hospital, said occupancy rates can vary dramatically throughout the day, and what's true at midnight can be different from what's true at noon.

"They take that occupancy number at midnight, so that's what gets reported on your daily reports. But keep in mind that the real business of a hospital is really from 7 a.m. to early evening, so your count can vary in the course of a day dramatically," Holwerda said.

He said Metro Health plans its budget around a 60 percent occupancy rate. The hospital bases its calculation on the 198 beds currently available for use, not on the 238 for which it is licensed, he said.

Spectrum Health Grand Rapids Vice President Marc Chircop said many factors impact the occupancy rate, from unpredictable stork arrivals to shutting down floors for renovation to patients who don't want to schedule elective surgery during the summer.

"You run into lots of issues, in terms of patients that need isolation, male/female issues. For example, here we have a nursing unit that's offline because we're renovating it. Even though those are licensed beds, we don't count them as available beds," Chircop said.

As a result, the occupancy rates that hospitals use internally may fail to reflect the rates recorded by the Michigan Department of Community Health, which takes a strict approach by looking at the number of patient-days compared to the number of licensed beds, without regard to what proportion of those beds are actually available.

Lody Zwarensteyn, president of Alliance for Health, a local health care planning agency, said he prefers the community health department's approach because whether or not a bed is available, capacity is still a capital investment for which the hospital must pay.

"The higher the occupancy, the more the facility is used. The lower the occupancy, the less it is used," Zwarensteyn said. "Because capital is tied up in buildings, the lower the occupancy, the more capital is tied up in things that are unnecessary.

"Clearly, you want to have capacity to service your needs. If occupancy is super high, that could lead to a situation where you have to turn business away. If it's low, buildings and facilities are waiting for patients, and it's a wasteful use of resources."

Hospital executives say the utilization of hospital beds can vary quite a bit. "On a seven-day week, our acute care side goes from a range of 68 percent on Saturday and Sunday to 80 percent on Tuesday, on average," Pirog said. "It moves up and down, depending on what day of the week it is.

"You're always going to have some beds in transition. Most places like to see a number between 80 and 85 (percent). Once you're at 85, you're probably close to the upper 90s on the three days per week."

Pirog said a hospital will know how many beds it needs to fill before it starts seeing net income.

"You can't really, financially, have a chance to make a dollar until patients come in," he added. "We like to see as many patients come through as need to be cared for."

Holwerda said the occupancy rate is one factor Metro Health relies on to craft budgets. "We take a look at our various units — childbirth to intensive care to med-surge to the pediatrics floor. It's not like you can shuffle patients from one area to another, so we look at demand over the course of the year, we look at discharges, at average length of stay, to arrive at our best guess as to how to go forward over the next 12 months," he said.

"Strange as it sounds, we could be running at 60 percent occupancy but have to turn patients away, because in the particular unit they need, you might be full," Holwerda added.

"We actually budget occupancy by unit," Chircop said. "Not all units are the same. Some run a higher occupancy by nature. Critical care units typically run a higher occupancy, general med-surge typically runs a lower occupancy. We like to keep some beds available as patients come in for emergencies. If you have all private rooms, you have greater flexibility in terms of hitting higher occupancy."

He pointed to Spectrum Health's "pretty aggressive construction mode" as evidence that the hospital is anticipating demand.

"We find when we're running in the mid-80s, that's the upper threshold of capacity," Chircop said. "The time of occupancy is midnight, so even though we're running in the mid-80s, if you took the occupancy of the hospital right now (daytime), it's probably pretty close to 100 percent occupancy."

Over the years, the number of hospital beds at Saint Mary's has gradually decreased, Zwarensteyn noted. He commended Metro Health for voluntarily reducing licensed beds at its new hospital in Wyoming, expected to open in the fall. But with all three hospitals in a medical construction binge, they need to find just the right balance between community demand for inpatient health care and capacity, he said.

"Who's paying the bill for the empty beds?" Zwarensteyn asked. "You don't staff it, don't heat it or light it, but someone's paying for it." 

Occupancy Rates, Grand Rapids Acute Care Hospitals, 2005


Hospital

Patient Days

Licensed Beds

Occupancy Rate

Hospital-Calculated Occupancy Rate (YTD 2007)

Metro Health*

42,114

238

48.4%

59%

Saint Mary's Health Care

56,668

230

67.5%

76%

Spectrum Health/Butterworth

169,061

755

62.2%

86%

Spectrum Health/Blodgett

54,413

306

48.4%

61%

*Metro Health's audited patient days for 2005 were 42,114, for an annual occupancy rate of 48.4 %; the Michigan Department of Community Health reported 12,994 patient days, for an annual occupancy rate of 15%.

Sources: Michigan Department of Community Health, Spectrum Health, Saint Mary's Health Care, Metro Health Hospital

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