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Published On Jan 13, 2015

POLICY

Are Hospitals Shrinking?

In one metric—inpatient stays—hospitals are seeing a steady decline.

A growing number of hospitals in the United States are running low on an important commodity: patients. The total number of days Americans spent annually as inpatients dropped 16% between 1992 and 2012, according to the American Hospital Association. While this trend isn’t new, research suggests it recently may have begun to accelerate. 

In a study posted on the Health Affairs Blog in January 2014, researchers at Kaufman Hall, a Skokie, Ill.-based health care consultant, reported that admissions at 71 hospitals in the greater Chicago area fell 5% in just two years, from 2010 to 2012. Health care systems repeated the analysis in other regions and found similar trends in eastern Massachusetts and the area around Newark, N.J. 

Why does this matter? If the economic model for hospitals is shifting, that shift will likely come with repercussions. Some hospitals have reported layoffs or a shift in services. Others have shuttered due to declining patient volume, an especially worrying fate for regional hospitals that provide essential local services.

Part of the decline stems from patients seeking treatment outside traditional hospital settings. For instance, the number of surgeries performed in U.S. hospitals has fallen 10% during the past two decades, with many operations moving to the ambulatory surgery centers springing up across the country. At such centers, patients come and go the same day. And even when patients are admitted to the hospital, many don’t stay as long as they might have a few years earlier. One reason is a shift to minimally invasive surgical techniques that may allow patients to be released more quickly, often without staying overnight. 

A greater emphasis on preventive medicine could also be a factor. Rob York, a coauthor of the Health Affairs study, found the decline in over-65 inpatients in the Chicago sample particularly dramatic, going down 8% to 9% during those two years. Older populations tend to have chronic conditions—diabetes, hypertension and cardiovascular disease, among others—for which good outpatient care can often head off a hospital stay. Admissions for these conditions are known as “ambulatory care sensitive admissions” (ACSAs), and the Chicago study found that physicians practicing under an ACO-like care management model dramatically reduced the volume of ACSAs in the hospital setting. 

There are also new pressures to prevent readmissions coming from the Centers for Medicare and Medicaid Services (CMS), which now penalizes hospitals financially if they readmit too many patients within 30 days of discharge. “There’s a broad policy signal coming out of Washington that says, ‘If you are running a health care system, think longer and harder about how you keep people out of the hospital,’” says Ashish Jha, a professor of health policy at the Harvard School of Public Health and a general internist in the VA Boston Healthcare System. New CMS policies have also had another effect: artificially shrinking inpatient totals even further. Hospitals can be penalized for keeping someone as an impatient when a later audit determines that they should have been an outpatient. To avoid this, some hospitals err on the side of caution and classify short-term patients as outpatients, even when they stay overnight. 

Jha believes the decline in inpatients will continue. Some hospitals are turning inpatient campuses into ambulatory care centers or long-term care facilities—a risky proposition. “Inpatient bed units are not ideally suited to be converted to ambulatory kinds of operations,” says Mark Grube, another coauthor of the Health Affairs Blog survey. Hospitals tend to be large buildings that are difficult to navigate, while ambulatory centers are smaller and easier to access. Some hospitals may be able to convert empty units into long-term care facilities, “but otherwise your options are pretty limited,” says York.  

Indeed, declining patient volumes may contribute to the demise of up to a fifth of U.S. hospitals over the next decade, predicts Jha, a trend that has already begun. With more patient care moving to outpatient facilities, the medical center as we know it may look very different in the future. “Hospitals,” says Mitch Morris, a physician and health care consultant with Deloitte LLP, “will increasingly become intensive care units for people who are truly very ill.”

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