- people on the move
Hospital capital investment predicted to slow in 2013
Flat patient admission rates, reimbursement uncertainties lead to caution.
Premier, a performance improvement alliance of more than 2,700 U.S. hospitals, reported in its latest economic outlook that 41 percent of 617 survey respondents — primarily, hospital C-suite, and materials and practice area managers — are projecting their capital spending to increase compared to last year. Premier said that statistic was 42 percent in fall 2010, and was at a two-year high of 46 percent in spring 2011.
An ongoing factor driving the dip in capital spending is reimbursement cuts, cited by 74 percent of respondents as the No. 1 trend impacting their hospitals. Another factor could be an anticipated reduction in patient admissions. Twenty-four percent of respondents believe their patient admissions will decrease — more than double what was projected in fall 2011 when it was slightly over 12 percent.
Executives from Metro Health and Spectrum Health agreed with Premier’s conclusion that inpatient admissions will be flat or close to it, along with the uncertainty about reimbursements from the federal government.
“We expect that some kind of reimbursement cuts will occur, either as part of the sequestration or some other legislative initiative,” said Michael Freed, executive vice president at Spectrum Health and president of its Priority Health HMO division.
“While we don’t feel that this is the best way to handle the problems associated with the Medicare and Medicaid programs, we think it is easier for legislators to reach agreement on provider rate cuts than it is for them to reach agreement on reforming the health care system,” added Freed.
Health care reform is focused on less use of hospital services and better management of patient care up front and early to reduce the need for hospitalization in the future.
“We’re seeing more and more of that occurring,” said Tim Susterich, chief financial officer at Metro Health.
At Metro Health, according to Susterich, planning for the next five years is based on a forecast of “flat to slightly increasing inpatient activity” over that period. However, he said any increase would probably be due mainly to the aging population.
Metro Health, the third largest acute care hospital in the Grand Rapids region, has about 12 percent of the patient market here, according to Susterich. He said that equates to about 10,000 to 11,000 admissions annually.
The cost of health care is the driving force behind reform, according to Susterich.
“Our health care industry and system is broke today — from a financial perspective, not from a clinical perspective — and we need to do things differently and better,” he said.
“It’s interesting. When health care reform was announced and approved, we thought the government was going to drive health care reform. And what we’re finding more is that the employers are beginning to drive it,” said Susterich.
“Employers and patients are demanding it,” he added.
Health care executives are being very careful how they plan future spending, said Freed.
“I think it’s reasonable to assume that projections for relatively flat patient admissions, coupled with concerns over future reimbursement cuts, are causing most health care systems to be very selective about where to allocate their capital spending,” said Freed.
When asked for specifics on patient admissions at Spectrum in 2012 and 2013, Freed said that after adjusting for an increase in “one-day-stay” patients who are held for observation (and were previously categorized as inpatients but are now considered outpatients), admissions there are expected to be “relatively flat” in both years.
Premier, which is based in North Carolina and also serves as a lobbying firm for its members, said that when health care executives were asked about the area in which they expect to make the largest capital investment over the next year, 43 percent cited information technology and telecommunications, up from 34 percent in spring 2011.
Thirty-four percent cited capital investments in infrastructure and construction, up from 28 percent in fall 2011, an 18 percent increase.
At Metro Health, “we’ve already made our significant investments,” said Susterich, referring to the new $165 million Metro Health Hospital that opened in Wyoming in the fall of 2007. Metro Health also has invested in neighborhood outpatient centers in 12 locations in West Michigan, and the system uses Epic health care management software.
In the future, he said, Metro Health will continue to update and enhance its information technology in ways to improve collaboration with physicians.
The pressure on health care costs has been leading to hospital partnerships and consolidations for efficiency. Metro Health joined with Novi-based Trinity Health and University of Michigan Health System in Ann Arbor in 2010 to launch the Pennant Health Alliance to provide “backroom” services to community hospitals and doctors’ groups. Those services include physician recruitment and group purchasing.
In October, Metro Health announced it would begin an active search for a “strategic partner” that would allow it to continue to accelerate its growth in view of rapidly changing conditions in the health care industry.
“We’re just starting that process right now,” said Susterich. “The board of directors decided to do it at a time of strength; financially, as well as organizationally, we are doing quite well.”
The latest Premier study indicates that investments in imaging, lab, and surgical and clinical equipment are forecast to drop by more than 23 percent compared to just six months ago. Product standardization — reducing the number of vendors that supply like products — was cited most often (almost 33 percent) as the top area to which hospitals are dedicating the most resources to improve their supply chains. Reducing costs for physician preference items was cited by more than 27 percent.
“Whether due to lower reimbursement or fewer patients, health systems are making tough choices on how to most effectively and efficiently provide care,” said Durral Gilbert, Premier’s president of supply chain services. “It is clear they consider the value-analysis process of using integrated data to improve outcomes and reduce costs paramount in the current health care environment.”
Not surprisingly, reducing waste is weighing heavily on the minds of health care providers. When asked what they consider to be the two biggest drivers of health care costs, 33.3 percent of respondents cited overutilization of products and services, up from 22.7 percent just six months ago. Premier’s waste report identified an opportunity for 464 hospitals to save $165 million annually in blood purchasing costs alone, by reducing blood usage by 802,716 units while maintaining positive patient outcomes.
“Inefficient use of products, services and labor is a major issue health systems are facing that requires active engagement from a variety of internal stakeholders,” said Mike Alkire, Premier chief operating officer. “Matching utilization data with outcomes, as our blood product analysis shows, can identify tremendous savings without compromising quality, even when looking at just one product or service.”