Clinical laboratories may want to offset plunging patient lab specimens by increasing outreach business

Hospital admissions are in decline across the country and the trend is being blamed in part on the rising use of high-deductible health plans (HDHP). The implications for hospital-based clinical laboratories is that lower in-patient totals reduce the flow of patient lab specimens as well. This situation may encourage some hospital and health-system labs to increase their lab outreach business as a way to offset declining inpatient lab test volumes and help keep down overall average test costs.

Healthcare Dive, which named “changing patient admissions” its “Disruptor of the Year,” used data from America’s Health Insurance Plans (AHIP) annual surveys to show the admission rate trend that is causing hospital operators and health systems to rethink how they do business going forward.

“We are really talking about how providers are not taking in as much revenue as they are spending,” Healthcare Dive noted. “Hospitals are largely fixed cost businesses, and rising expenses have been outpacing admissions growth.”

Experts Claim the ‘Hand Writing Is on the Wall’

According to Healthcare Dive’s analysis of US hospital admissions, which used data from the American Hospital Association’s Annual Survey, hospital admissions peaked at 35.4 million in 2013, coinciding with the roll out of the Affordable Care Act. The total fell to 34.9 million in 2014, before rebounding slightly to 35.1 million in 2015. The 2016 survey, published in 2018, showed hospital admissions remaining relatively flat at approximately 35.2 million.

Paul Hughes-Cromwick

Paul Hughes-Cromwick (above), Co-Director, Sustainable Health Spending Strategies, Altarum in Ann Arbor, Mich., expects hospitals to be challenged by flat admission rates going forward. “Times are still pretty good, but the writing is on the wall for hospital operators,” he told Modern Healthcare. This will impact clinical laboratories owned by hospitals and health systems as well. Photo copyright: Long Beach Business Journal.)

Most experts place the blame for slumping patient admissions on HDHPs. Such plans, which are paired with a tax-advantaged health savings account, have enabled employers to shift initial medical costs to workers in exchange for lower monthly health insurance premiums. Nearly 20.2 million Americans were enrolled in HDHPs in 2016, up from 15.4 million in 2013 and far above the roughly one million plans in existence in 2005, the AHIP surveys revealed. HDHPs were first authorized by Congress in 2003.

Consumers Delaying or Opting Out of Healthcare

Faced with higher out-of-pocket medical costs, consumers are opting to postpone or forgo elective surgeries and procedures, which in turn is placing pressure on healthcare systems’ operating revenues.

According to Healthcare Dive, Community Health Systems experienced a 12% drop in operating revenue in the first nine months of fiscal year 2017, while HCA Healthcare and Tenet Healthcare dropped 6.7% and 3.8%, respectively.

J. Eric Evans, President of Hospital Operations, Tenet Healthcare (NYSE:THC), a 77-hospital chain, told Modern Healthcare, today’s consumers are spending their healthcare dollars differently.

“The more elective procedures, things like orthopedics, we see the softness,” Evans told Modern Healthcare. “So, we think that does play into the story of deductibles rising and changing behaviors.”

The challenges for not-for-profit hospital systems are no different. Modern Healthcare noted that the 14-hospital Indiana University Health system reported a 46% drop in operating income in the third quarter of FY 2017 on a year-over-year admission decline of 2%.

Healthcare Systems Rethinking Their Business Strategies

“Health systems en masse are reacting to shifting dynamics in healthcare utilization by throwing money and resources to lower cost settings, such as urgent care centers and freestanding emergency departments,” Healthcare Dive noted. Dark Daily has reported on this trend. (See, “From Micro-hospitals to Mobile ERs: New Models of Healthcare Create Challenges and Opportunities for Pathologists and Medical Laboratories,” May 26, 2017.) Health systems also are selling unprofitable hospitals and laying off or eliminating positions to cut costs. Tenet Healthcare, for example, is laying off 2,000 workers while selling eight of its US hospitals and all of its nine United Kingdom facilities, Modern Healthcare reported in January.

“We are seeing and are working with health systems to take out pretty significant amounts of cost out of their operations, both clinical and nonclinical, and setting targets  like 15-20%, which is a transformative change,” Igor Belokrinitsky, Vice President and Partner at Strategy&, PricewaterhouseCoopers’ strategy consulting group, told Healthcare Dive in a 2017 interview.

Lower hospital in-patient volume means less clinical laboratory test orders. This, in turn, will result in increases in the average cost per inpatient test. Anatomic pathology groups and medical laboratory leaders who work in or service hospitals may wish to take proactive steps to boost test referrals from outpatient and outreach settings as a way to help keep down the lab’s average cost per test.

—Andrea Downing Peck

Related Information:

Disrupter of the Year: Softening Patient Admissions

Hospital Volumes Laid Low by High-Deductible Health Plans

How Hospitals Feel about AHCA’s Death, Future with ACA

2016 Survey of Health Savings Account-High Deductible Health Plans

Fast Facts on U.S. Hospitals, 2018

5 Things to Know about Tenet Healthcare’s Restructuring

From Micro-hospitals to Mobile ERs: New Models of Healthcare Create Challenges and Opportunities for Pathologists and Medical Laboratories