Ascension’s refocus exemplifies challenges facing healthcare systems as shrinking reimbursement rates, stagnant inpatient admissions, and changing care models put a financial squeeze on traditional hospitals

Hospital-based medical laboratories and anatomic pathology groups are adapting rapidly to both external and internal forces in the healthcare continuum. Efforts to shift clinical care from hospitals to ambulatory settings is a trend that impacts how, where, and when ordering physicians request testing.

Further, healthcare consumers are responding positively to the growth in local urgent care and walk-in clinics, even as hospital support for in-home healthcare treatments for chronic diseases is increasing. This is why even large-scale health systems are seeking ways to bring caregiving to patients, wherever they may be. (See Dark Daily, “Consumer Trend to Use Walk-In and Urgent Care Clinics Instead of Traditional Primary Care Offices Could Impact Clinical Laboratory Test Ordering/Revenue,” May 25, 2018.)

One good marker for this trend is the year-over-year change in hospital admissions. Data given to Congress in the latest MedPac (Medicare Payment Advisory Commission) report on Medicare payment policy show that, between the years 2006 and 2016, the cumulative percent change in the number Medicare inpatient discharges per beneficiary declined by 21.8%. During these same years, the cumulative percent change in the number of outpatient visits per Medicare beneficiary increased by 49%!

Now, Ascension Healthcare of St. Louis—reportedly the nation’s largest nonprofit healthcare system—also appears to be shifting its focus from hospital-based care to less expensive outpatient settings and services. It is doing this by using new staffing models and external businesses.

The move highlights an industry trend. Driven by continued economic, regulatory, and care delivery challenges, hospitals and health systems have been forced to consider different business/clinical models that better serve the evolving needs of their patients.

However, fewer hospitals and shrinking budgets also could impact hospital-based medical laboratories’ revenue, as hospitals seek new formulas for profitability.

Anthony-Tersigni-CEO

In a video message, Ascension President and CEO Anthony R. Tersigni (above), EdD, FACHE, told 165,000 employees that Ascension would be reducing its hospital footprint and administrative costs, while exploring telemedicine and other outpatient care delivery models. This is potentially a major shift in how the nation’s largest nonprofit healthcare system does business, which could impact in-hospital and local independent medical laboratories. (Photo copyright: Ascension.)

New Strategic Direction

According to Modern Healthcare, Ascension President and CEO Anthony Tersigni, EdD, FACHE, outlined the company’s “advanced strategic direction” via video message to his 165,000 employees on March 23. He told his employees a new strategy was needed, due to dwindling reimbursements from both federal and private insurers, increasing regulatory complexity, skyrocketing pharmaceutical costs, and a shift from inpatient to outpatient care and from fee-for-service to value-based care.

“We are in the midst of major transitions, not only in how we provide care, but in how we are reimbursed for the services we provide,” Tersigni revealed in the video message.

Tersigni stated that the world’s largest Catholic health system needs a “dual transformation,” a process that would both “transform current healthcare delivery and operations to meet the challenges presented by the rapidly changing environment” and “safeguard a sustainable presence in its communities that responds to the changes in how people are accessing care.”

In his remarks, Tersigni outlined changes Ascension already had made to reduce administrative costs by $400 million. Further leadership and organizational restructuring is expected to net $61 million of additional savings in fiscal 2019.

In addition, he noted, the health system would save $57 million a year by “aligning its pay practices” to eliminate inconsistencies and follow common benchmarks.

Reducing Hospital Footprint and Controlling Patient Experience

Modern Healthcare also noted that the health system had “implemented new staffing models and productivity standards for nurses and other caregivers, as well as for nonclinical positions that align with other Ascension facilities.”

Ascension recently signed a letter of intent to sell St. Vincent Medical Center in Bridgeport, Conn., to Hartford Healthcare. The deal, according to a St. Vincent’s press release, includes a:

  • 473-bed community teaching hospital;
  • 76-bed inpatient psychiatric facility;
  • Vincent’s Special Needs Services; and
  • Multi-specialty provider group.

“There has always been a need for hospitals in our country, but not as many as we have today,” Tersigni told Modern Healthcare. “We don’t need to control everything. What we need to do is collectively control the patient experience along the continuum.”

In addition to selling off hospitals in cities where it is not the market leader, Ascension is looking for partners that will enable it to expand its reach in outpatient settings, such as:

  • Urgent care;
  • Skilled nursing;
  • Home healthcare; and,
  • Telemedicine.

Ascension’s plans also include minimizing business travel to reduce costs and hiring a Chief Digital Officer, whose job will include improving price transparency, Modern Healthcare reported.

Are the Days of Large Hospital-based Health Systems Numbered?

Healthcare Dive reported that admission rates for many health systems are declining as expenses are rising. That double-edge sword is causing the healthcare industry to question “whether the days of large hospital-based health systems are numbered.” The article also noted Tenet Healthcare (a network of 69 acute care and specialty hospitals in 11 states) and Community Health Systems (operator of 126 hospitals in 20 states) both are shedding hospitals in an effort to reduce debt. Tenet’s restructuring also includes laying off 2,000 employees.

According to Ascension’s website, the healthcare system operates more than 2,600 sites of care—including 153 hospitals and more than 50 senior living facilities­—in 22 states and the District of Columbia. Nevertheless, it has not been immune from the multi-faceted pressures facing the healthcare industry.

Becker’s Hospital Review reported that Ascension’s operating income dropped 78% to $84.7 million in the first half of fiscal 2017, while operating revenue fell to $11.3 billion from $11.4 billion during the same period one year ago. The decline in revenues was largely attributed to the 2017 sale of Ministry Saint Joseph Hospital in Marshfield, Wis., and the divestiture of Door County Medical Center in Sturgeon Bay, Wis., in 2016.

Gwen MacKenzie, former Senior Vice President, Ascension Healthcare, and Ministry Market Executive, Ascension Michigan, oversaw Ascension Health in Michigan’s employee layoffs and management restructuring, which saw the 14-hospital system lay off 500 workers, including 20 executives and managers.

Concerning Ascension’s new direction, she told Modern Healthcare, “We think this is our new normal. The landscape we are navigating here is the new reality.”

If Ascension’s restructuring of its operations away from hospital-centric care is a harbinger of things to come, hospital-based and independent clinical laboratory leaders may be forced to revamp their business models as well, to survive the changes.

—Andrea Downing Peck

Related Information:

Ascension Could Shift Away from Hospital Focus, Modern Healthcare Video Finds

2018 Report to the Congress: Medicare Payment Policy

Ascension Revamps to Enter New Era

Ascension Layoffs in Michigan Total 500 So Far

As Ascension Restructures, it Hints at Smaller Hospital Footprint

Ascension’s Operating Income Dips 78% in First Half of FY 2018

Ascension Michigan’s Market Leader Leaving Post

Ascension, Hartford HealthCare Sign Letter of Intent for Hartford to Acquire St. Vincent’s Medical Center