Issue link: https://beckershealthcare.uberflip.com/i/796926
21 PRACTICE MANAGEMENT Key Thoughts on the Movement From Inpatient to Outpatient Care By Scott Becker, Publisher of Becker's Healthcare, and Tamara Rosin W hether Obamacare or Trumpcare, we expect that there will continue to be substantial movement from the inpatient to outpatient arena. e overall shi to outpatient; big box stores; frogs boiling. (A) e movement to outpatient care has been gradual but significant. It has been generally growing at a clip of 2 to 3 percent a year. is move- ment from hospital inpatient to outpatient varies significantly. Some states have seen very little movement while others have seen substan- tial movement. is movement is expected to continue for several more years. (B) Like in big box stores, the movement from inpatient is gradual but sig- nificant. Big box stores saw gradual movement to e-commerce that didn't immediately kill their margins and business. However, hospitals, like big box stores, have low profit margins and the gradual loss of inpatient to out- patient business ultimately has a very dramatic impact. us, even though gradual, at some point, it creeps up on margins and profits and can be very significant. See the article I co-authored with Molly Gamble titled "Do Hospitals and Health Systems Face the Same Fate as Big Box Stores? 3 Key oughts," January 18, 2017, on this issue. For a copy of the article, please email Kirsten Doell at kdoell@mcguirewoods.com. (C) As an analogy there is the old story about a frog. If you throw a frog into a pot of boiling water it will jump out instantly. But if you place a frog in cold water and slowly raise it to a boil, the frog doesn't know it is in trouble until it is too late. With big box stores we think this was largely the case with the movement to the internet. With hospitals and health systems, the movement started with small movements and then has accelerated to cause greater trouble. 1. Stalls and Hiccups. ere are some huge hiccups in the movement to outpatient. ere is currently a false claims case investigation with a stand-alone ER company and a large investigation and destruction of val- ue of eranos, the outpatient lab company. ese two areas were expect- ed to have a negative impact on hospitals. ey have not been as bad as expected. 2. SCA; Optum. In contrast to the hiccups, there was the recently announced merger of Optum, a health services company that is part of UnitedHealth Group, and Surgical Care Affiliates, an ASC company. is deal brings together in large part the largest payer in the country with one of the largest surgery center providers. I have two or three comments on this. First, SCA has brilliant leadership and we shouldn't underestimate the impact of this move. Second, the fact that Optum, which is part of UnitedHealth Group, is willing to acquire the largest surgery center chain shows how far they have come in no longer being held hostage by local hospitals and health systems. In the old days, even though payers wanted to work with outpatient providers, they were very concerned because of the response their biggest supplier (hospi- tals) could have on their bottom line. Now, they seem to be willing to make a move. Other troubling considerations. Here are five thoughts on trouble ahead. 1. Hospitals are seeing lower inpatient days and lower procedures. 2. At the same time they are seeing higher labor costs and the labor costs are hard to reduce. 3. Hospitals can't reduce capacity easily. 4. e impact of the movement and other issues are again leading to lay- offs. 5. Supply chain costs are oen harder to manage in the outpatient set- ting. Answers. In terms of answers to these challenges, here are three thoughts. 1. First, in the ideal situation a hospital can backfill in the capacity it has lost to outpatient. 2. Second, more sites, whether as a large health system or large big box store, seems to not be the winning strategy. Expansion has the appear- ance for a period of time of giving the hospital lots of market reach. However, we have found with large health systems that more facilities does not equal more profit or necessarily market essentialism. 3. ird, there is great opportunity to be market dominant and market es- sential. At the same time this has to be done on a rational cost market plat- form. is seems to be the goal and the place for profitability for health and hospital systems, i.e., one must aim for dominance of market to be needed. ASCs; urgent care; spine; telemedicine. Certain other examples of the movement to outpatient include: Surgery Centers. ere has been a movement of about 2,000 to 5,500 surgery centers over the last 15 years. At the same time over the last couple years the net growth in surgery centers has been next to zero. Urgent Care. On the urgent care side there has been a movement of 3,000 urgent care facilities to about 10,000 sites in a few years. is has been dra- matic. Spine. On the spine side there has been a movement of about 45,000 procedures that are done outpatient to about 300,000 done in the out- patient setting per year. Telemedicine. Finally, telemedicine has also grown tremendously. is has been rumored to be almost approximately 50 percent of all Oakland, Calif.-based Kaiser Permanente's visits. e fascinating thing about Kai- ser and the movement to the efficiency of telemedicine is that because Kaiser is also a major payer, they are responsible for total costs of the care they provide. Subsequently, they need to find ways to deliver care that is cheaper and more efficient. us, the great adoption of telemedicine. n