Hospital margins depend highly on the type and volume of services they perform. Historically, the hospital was the only place to go for healthcare services. However, today a variety of stand-alone specialty locations can meet patient needs, often at lower costs and shorter wait times.
For example, Urgent Care Centers have replaced many ER visits, and free-standing Imaging and Lab centers have become diagnostic testing site alternatives. Hospitals must anticipate the next significant volume shift and plan ways to offset the impact. The amount and type of procedures approved for ASCs continue to increase.
In the past five years, vital orthopedic procedures such as Total Knee and Total Hip Arthroplasties have been removed from the Medicare Inpatient-Only list. This change moves these procedures to the outpatient setting.
According to the American Hospital Association, by 2029, Inpatient procedures will decrease, leaving Hospital Outpatient surgeries to rise by 19% and ASC surgeries by 25%.
What does this mean?
The inpatient population remaining within the hospital will be the sicker population. It will cost more to care for these patients. This may drive the average profit margin down per case, as more care and resources do not always proportionately relate to increased reimbursement. Low acuity procedures with high throughput often subsidize some of the longer-term and higher-cost care on the hospital balance sheet.
A revenue re-evaluation must occur when the low-cost procedures move off the hospital campus. New strategies should replace the existing ones. But how can we predict the change at our facility, and what plans can we implement to safeguard our revenue?
First, evaluate factors in your market that could impact your business.
- Study your market: Have additional outpatient centers, ambulatory surgical facilities, or other health service centers opened that would also serve your patient population?
- Analyze trends: What has occurred at your hospital or health system over the past 2-3 years? Can any trends point to future indicators of change?
- Review your population: What is happening in the neighborhoods that surround your hospital or health system? Are demographics shifting in any way? Is the number of residents increasing or decreasing?
- Adjust for significant changes: Is a new business driving residents to your area? Has there been recent development of land to attract more homeowners to your local surroundings? Or, on the contrary, have any significant business shutdowns or lay-offs occurred nearby?
Any of these events can cause an unexpected shift in the type and number of patients you may anticipate in the future. It is critical to understand what has happened and may happen in your external environment to impact patient activity.
Considering one or more studies in the above review have flagged the potential for declines in patient volume, assessment and planning for safeguarding revenue should be the next step.
- Evaluate Staffing and Resources: It is critical to scale your costs to align with your adjusted revenues. A shift in staffing, consolidation of supplies, or scheduling and blocking review could yield significant savings.
- Consider Premiere Services: Highlighting specialty services and reducing the cost of performing underutilized procedures will streamline expenses and enhance proficiency. In doing so, establishing a niche in the market will draw patient volume and top-tier talent.
- Review payer contracts: Ensure adequate reimbursement for remaining services by analyzing your current against predicted volume trends. Understanding your population shifts in advance provides the insight to seek sufficient compensation for the right services, minimizing the negative impact of the change in patient activity.
Reduced hospital stays and increased outpatient procedures result from technological advancements and improved outcomes. However, the new healthcare landscape must prompt new ways of structuring the delivery and payment for care to remain solvent.
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