MEDACorp Survey of Hospital Administrators Shows Inpatient Care is Decreasing; Could Change From Where Clinical Laboratories Receive Orders

As inpatient care declines, outpatient care expands, signaling a shift from where physician orders for medical laboratory tests originate

It’s a well-established fact that the year-over-year increase in the volume of outpatient procedures is consistently greater than 8%, while the annual growth in inpatient admissions is at or below 3%. Clinical laboratory managers and anatomic pathologists are aware of these facts.

MEDACorp, a strategic knowledge resource and subsidiary of Leerink Partners, a Boston-based investment bank that focuses on the healthcare industry, conducted a quarterly survey of hospital administrators from 47 hospitals in June of this year. The purpose was to evaluate healthcare utilization trends for different types of medical facilities.

According to the survey, the “ utilization trends for both [quarter-over-quarter] and [year-over-year] are decelerating across all four sites of service.” However, hospital administrators report the use of inpatient and other hospital services did not fare as well.

“The results are also modestly positive for facilities, with the slowing 0.7% increase in inpatient procedures (IP) utilization still higher than consensus of ~flat (sic) for the coverage group. Significant mix shift continues as IP mix is down and the outpatient procedure (OP) mix is up across all service lines, supporting our recent analyses of an accelerated push to ambulatory sites of service,” the survey noted.

The survey revealed:

  • Inpatient services increased by just 0.7% during the second quarter of 2018, down from 1% growth during the second quarter of 2017;
  • Ambulatory surgery center utilization grew by just 1.4% during the second quarter of 2018, down from 2.2% for the same quarter in 2017; and,
  • Emergency department utilization increased by 0.9% in the second quarter of 2018.

“It was even weaker than many of us expected,” Ana Gupte, PhD, Managing Director, Healthcare Services at Leerink, told Modern Healthcare. “It’s pretty clear there’s no volume rebound.” (Photo copyright: Leerink.)

Inpatient Top Surgeries Predicted to Keep Moving to Outpatient Settings

The Leerink survey found that orthopedic and cardiac procedures are leading the trend of shifting clinical procedures from inpatient to outpatient care. For example, heart surgeries were performed in outpatient settings 9% of the time over the past year and are expected to increase to 12% during the next year. Inpatient heart surgeries are expected to decrease 1% over the next year, moving from 82% to 81% of surgeries performed.

Inpatient hip procedures also are projected to drop from 77% to 75% over the course of the next year, while outpatient hip procedures are expected to increase from 17% to 19%. The survey respondents also expect other surgeries including urological, gynecological, spine and knee procedures to move to outpatient settings over the next year.

Forty-five percent of the respondents in the survey named baby boomers aging into Medicare as the most important driver of hospital utilization. Fifteen percent attributed the trend to the effects of the Affordable Care Act (ACA), and 13% cited the improving US economy as driving the use of outpatient medical facilities.

The graphic above, taken from the Leerink MEDACorp survey, illustrates a shift in healthcare procedures from inpatient to outpatient settings. Along with the surgical relocations are changes in reimbursements as well, which directly impacts clinical laboratories revenue streams and billing procedures. (Image copyright: Leerink.)

The survey respondents were from different regions and disparate population areas:

  • 49% of the surveyed facilities were located in metropolitan areas;
  • 40% were in suburban areas; and,
  • 11% were in rural areas.

In addition:

  • 32% were in the South;
  • 26% were in the Northeast;
  • 21% were in the Midwest; and,
  • 21% were in the West.

Most of the facilities used in the survey were community hospitals, which accounted for 62% of the environments. Thirty-two percent of the facilities were academic medical centers, while the remaining 6% were other types of facilities.

The majority of the respondents for the survey were C-suite executives. In hospital settings that would include the Chief Executive Officer (CEO), Chief Financial Officer (CFO), Chief Operating Officer (COO), and other Chief titles, and, of course, hospital administrators.

Clearly, this type of downward trend could negatively impact clinical laboratories, pathology groups, and other service lines in hospital networks. Fewer patients equal less revenue for hospitals, which could eventually lead to budget cuts. A responsible medical laboratory manager will be prepared for these possibilities.

—JP Schlingman

Related Information:

Hospital Execs Say Inpatient Volume Growth Isn’t Rebounding

Hospital Utilization Slows as Healthcare Moves to Cheaper Care Settings

2Q18 Hospital Util. Survey: Utilization Decelerating, Shift To OP/ ASC Continues

ASCs Beat Inpatient Setting for Quarter, Year-over-year Utilization Increases—6 Study Insights

10 Key Trends for ASCs and Outpatient Surgery in the Next 10 Years

Health Systems Putting Imaging Services, Such As MRIs, In Strip Malls and Shopping Centers To Help Patients with Cost and Convenience

Recognizing the need to serve patients with high-deductible health plans, hospital systems are opening healthcare centers in outpatient settings where patients can receive care and undergo procedures—including clinical laboratory tests—more conveniently and for less cost

Health systems are putting medical imaging services, such as MRIs, in strip malls and shopping centers as a way to make it easier for patients. Such locations can also offer lower-cost procedures because of lower overhead compared to imaging centers located in hospitals. This trend to offer patients more convenient service at a lower cost is something that clinical laboratory managers and pathologists should watch and understand.

One driver behind this trend is the growing number of Americans enrolled in High Deductible Health Plans (HDHPs), where deductibles can exceed $6,000 for individuals and $12,000 for families. With such high deductibles, patients are now keenly focused on the cost of their healthcare. Medical laboratories and anatomic pathology groups have been impacted by this trend, as more patients shell out cash to pay for walk-in procedures and providers must collect full payments for services rendered.

Hospitals and health systems recognize the increased demand for outpatient, lower-priced medical services, along with price transparency. Patients with HDHPs are one reason why hospital bad debt is growing.

Healthcare Shopping Drives Lower Costs and Convenience

Price shopping on the Internet for medical services also is becoming more popular due to the availability of online doctor and facility ratings and easily-accessible price comparisons.

There are more than 7,000 stand-alone imaging centers in the US that operate independently of hospitals. About 70% of diagnostic imaging services occur in hospital settings with the other 30% performed in outpatient facilities.

According to Amino, a healthcare transparency company based in San Francisco, the cost for an MRI can vary significantly depending on where a patient lives and what type of facility is utilized for the test. Their research found that the cost of a limb MRI can range from hundreds of dollars at a freestanding facility to as much as $4,000 at a hospital. In some states, the price difference between getting an MRI at a hospital versus a stand-alone facility was almost $2,000. The average cost of having an MRI performed in a hospital setting is $2600.

Based on data from Amino, the graphic above illustrates the wide range of prices for MRIs throughout the country, and the cost disparity between hospital and free-standing medical imaging centers. In the future, pathologists and clinical laboratory managers can expect to see the publication of similar graphs that show the variation in the cost of clinical laboratory tests and anatomic pathology procedures, not just by state, but by individual laboratories. (Graphic copyright: MBO.)

Smart Choice MRI, based in Mequon, Wis., charges a maximum price of $600 for an MRI. The company now has 17 locations in Illinois, Minnesota, and Wisconsin, but plans to have 90 facilities within the next three years.

“The rise of high deductible health plans has fueled consumers who understand their options and demand a higher level of service from their providers,” Rick Anderson, Chief Executive Officer of Smart Choice MRI told the StarTribune. “Quality, service-focused care at a fair, transparent price has never been more important.”

Anderson added that his company can handle 94% of MRI procedures in their convenient, freestanding imaging facilities.

“I think the quality is very good, but we’ve combined the cost and quality, and most importantly the convenience of being in the neighborhood where people are shopping,” Anderson said. “If you look at our Richfield (Minnesota) location, we’re literally next to SuperTarget, Caribou Coffee, Noodles and Company, and Qdoba.”

Public and Private Health Insurers Shift Payments to Free-standing Facilities

Anthem recently announced they will no longer pay for outpatient MRIs and CT scans performed at hospitals in almost all of the states where the health insurer does business. They are requiring patients to have the tests performed in free-standing imaging facilities in an effort to cut costs and lower premiums. This change could affect 4.5 million people in 13 of the 14 states Anthem serves, with New Hampshire being the exception.

Diagnostic imaging is not the only medical service transitioning to outpatient facilities.

In July, the Centers for Medicare and Medicaid Services (CMS) announced that it is considering payment approval for total hip and knee replacements performed in outpatient settings. This change could go into effect as early as next year.

According to Steve Miller, Chief Operating Officer at Ambulatory Surgery Center Association, an estimated 25-50% of joint replacements could be performed on an outpatient basis.

“There’s more and more comfort among surgeons who are coming out of residencies where they trained to do surgeries on an outpatient basis,” Miller told Modern Healthcare. “The volumes are doubling year over year.”

Surgeons Approve of Free-standing Surgery Centers

There are currently more than 5,500 ambulatory surgery centers in the country and upwards of 200 of those facilities are performing outpatient joint replacement procedures. Three years ago, there were only around 25 facilities providing these services.

In 2015, there were more than 658,000 total hip and knee replacements performed on Medicare beneficiaries, according to CMS data. In 2014, the government paid more than $7 billion for the hospitalization costs of these two procedures. The CMS estimates that the cost for uncomplicated knee replacement surgeries in 2018 will be $12,381 for an inpatient procedure and $9,913 for the outpatient rate.

Physicians feel that performing joint replacements in outpatient facilities could reduce costs by up to 50%.

“I could do maybe 20% of my Medicare patients on an outpatient basis, as long as they have the support and structure at home to help them recover,” said Matthew Weresh, MD, a physician at Des Moines Orthopedic Surgeons (DMOS) in the Modern Healthcare article. “It’s a great move by Medicare.” DMOS plans to begin performing joint replacements at an ambulatory surgery center later this year.

Pathologists would be wise to monitor this trend and anticipate how anatomic pathology services might shift towards lower-cost settings. For clinical laboratories, this trend further illustrates the need to prepare for more consumers paying cash for their medical services and seeking cost-effective, high-quality options.

—JP Schlingman

Related Information:

Coming Soon to a Strip Mall Near You: An MRI Provider

MRI Competition Heats up in Twin Cities

Anthem’s New Outpatient Imaging Policy Likely to Hit Hospitals’ Bottom Line

Free Standing Imaging Center and Hospitals

Need an MRI? It Pays to Shop Around. Big Time.

Hospitals Leery of CMS Proposal to Pay for Joint Replacements in ASCs