Becker's Hospital Review

19 CMO / CARE DELIVERY How system ownership affects hospital profits, quality By Paige Twenter A er a health system acquires an independent hospital, workforces and operating costs shrink as prices and readmissions increase, according to a new report. In 2000, 58% of U.S. hospital beds were under system control. By 2020, this figure increased to 81%. Additionally, the proportion of hospital markets without any independent hospitals increased from 7% to 25% in 20 years. ese trends prompted Elevance Health researchers to investigate what happens aer hospital chains scoop independent medical centers. "Since product quality is less transparent in healthcare than in hotels or restaurants, the rise of chains deserves greater scrutiny in this sector," according to the report, titled "e Corporatization of Independent Hospitals." Using patient claims data from Elevance, the researchers studied 101 independent hospitals across 20 states that transitioned to system ownership between 2013 and 2017. e report focuses on three outcomes: Mean price for an inpatient stay paid by Elevance, total operating cost per bed, and the 90-day readmission rate aer an inpatient stay for cardiac care. Here are eight findings: 1. e average target hospital has 230 beds and records 10,000 admissions per year. e average acquiring system has nearly 3,900 beds across 17 hospitals and records 177,000 admissions per year — a seventeenfold difference. 2. System ownership increases the average hospital's revenue by about $2.7 million and decreases expenses by $11.2 million per year. In other terms, hospitals shedding their independence, on average, see annual surpluses of $13.9 million. 3. Within two to three years of system ownership, the mean reimbursement per inpatient stay for commercially insured patients increased about 6%. Within-market deals led to greater price increases. 4. Readmission rates for cardiac care patients — who typically cannot avoid or delay hospital care compared to other conditions — increased by about 3 percentage points. 5. Personnel spend drops 6% aer acquisition, accounting for about 60% of the total reduction in operating expenses. e average target hospital's operating costs decline by about $80,000 per bed when acquired by a system with seven or more hospitals. 6. e researchers estimate an increase in inpatient hospital revenue of $11,656 per bed, and an annual decline in operating expenses by $48,281 per bed aer the acquisition. 7. "Considering the effects on revenue and expenses together, we estimate an increase in hospital operating profit of about $60,000 per bed per year, about 6% of the operating expense for the average targeted hospital," the report said. "Specifically, our estimate implies that for every $100 more in operating expense reduction, hospitals accept a lower price increase equivalent to $8 in lost commercial revenue." 8. Lower labor costs accounted for most of the savings, which is explained mostly by a reduction in employment. Larger cuts in staffing were also tied to 40% of the higher readmission rates. e results are published in the Journal of Political Economy Microenomics and are part of a working paper for the National Bureau of Economic Research. n New York system to train employees as peace officers By Paige Twenter S ecurity officers at Rochester Regional Health now have the opportunity to become peace officers, NPR affiliate WXXI reported Nov. 25. This change comes as a result of a New York state Senate Assembly bill, which was signed into law Nov. 22. The legislation allows trained security officers at the system to issue appearance tickets, make arrests, conduct constitutional searches and confiscate illegal firearms, according to the report. Tim Tull, vice president of safety and security for Rochester Regional Health, told WXXI the legislation is crucial to the system. "This milestone is not just about responding to threats, it's about creating an environment where everyone feels secure, where our team members can focus on delivering compassionate care, and our patients can heal without fear," Mr. Tull said. The system said it will partner with local law enforcement on peace officer training. n

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