Patient Volumes, Patterns Shifting

Reduced inpatient admissions and readmissions are having a corresponding effect on hospital and health system revenues, with question marks over reimbursements. Hospitals are bracing for impact.

This article appears in the March 2014 issue of HealthLeaders magazine.

That rumbling sound you hear is the seismic shift of patient volumes for hospitals. Inpatient volumes and readmissions are shrinking. Newly insured are knocking at the door. A bundle of contradictions is at hand. Hospitals are bracing for the possibilities and the what-ifs.

At the Beaumont Health System, officials are working hard to anticipate shifting patient populations. Beaumont is a regional healthcare system with 1,728 licensed beds at three locations in the metropolitan Detroit area. Because it is an integrated system, Beaumont's leaders are confident they can move ahead effectively in the coming patient population environment, says Nick Vitale, executive vice president and CFO. Still, there are always wrinkles in the planning process.

Several months ago, Beaumont opened a 12-bed physical and occupational rehabilitation unit at its Troy Hospital because, without such a facility, Beaumont found itself sending patients to competing facilities.

What surprised hospital officials, Vitale says, was that "it filled up so quickly, in a couple of months." Essentially, "we look to see where there's a need and use our limited resources."

Across Detroit, Henry Ford Health System's top officials also were having plenty of meetings about the future and thinking about the flip side of their success in recent years of reducng readmissions and having fewer patients in their hospital beds. That effort worked. Now what? To improve its market share, Henry Ford is looking to collaborate with postacute care providers and planning on improved care for the aged and chronically ill.

Henry Ford is a comprehensive, integrated, nonprofit healthcare organization that includes six hospitals. Since early 2013, the number of admissions to Henry Ford hospitals has declined 6% and readmissions decreased about 19%. The overall admissions rate has hovered around 40,000 annually, according to William Conway, MD, the health system's executive vice president and chief quality officer, who also serves as CEO of the Henry Ford Medical Group.

Those figures are all good news; that's where healthcare is headed, toward value-based care, says Conway. But that success doesn't mean Conway or the other Henry Ford officials are resting easy.

"The scary part and the hardest thing is nobody really knows what consumers are going to do," says Conway. "Efficient patient management should suggest there would be less need for hospitalization and maybe fewer encounters for patients and the hospital. Yet with healthcare reform, these forces aren't perfectly aligned." Henry Ford is maintaining the course and is "not planning for a large influx of any ambulatory setting and not bulking it up," he says.

The shifting patient patterns and projections are giving healthcare leaders headaches. The reduced inpatient admissions and readmissions in some markets have a corresponding impact on hospital and health system revenues, with question marks over reimbursements. At the same time, healthcare organizations are bracing for an influx of new patients under the Patient Protection and Affordable Care Act.

Integrated systems and hospitals agree that they need to aim for comprehensive care that targets the shifting patient populations—especially the projected increase of chronically ill patients and the aging. And as organizations try to prevent readmissions and move toward preventive care in a population health model, they will be focusing on post-discharge care, ensuring prescriptions are filled, and making follow-up appointments.

To carry out their mission, leaders believe they must strengthen their provider base and make doctors more readily available via advanced technology or even simple phone call appointments. Ultimately, coordinated care with fully engaged communities is the best answer toward the shifting patient volumes, though not something easily accomplished.

Uncertain scenarios

Although predicting patient populations can be complicated and uncertain, hospital admission rates in the United States have been on a long-term decline, often due to better treatments. The reasons for many admissions today are different than they were 30 or 40 years ago because of improvements in care, says Lloyd Michener, MD, chairman of the department of community medicine at the 957-licensed-bed Duke University Medical Center in Durham, N.C. For example, while pneumonia was a key reason for admissions decades ago, that is no longer the case. Yet hospitals are predicting an increasing need for hospitalization from a growing aging and chronically ill population, he says.

Among the unresolved areas of shifting patient populations is the estimated 14 million people who are expected to join the ranks of the newly insured this year and the expansion of Medicaid eligibility. That got off to a complicated start last year when there were flaws in the computer systems at HealthCare.gov and state-based insurance exchanges.

Then, there is the question about the potential impact of the young population that is expected to go into the system, ostensibly to offset the costs of the elderly and the chronically ill. Is the potential dramatic or will it be a bust? These issues are bound to complicate hospital finances and will play a role in how leaders adjust to shifting patient populations.

"It's hard to model what's going to happen, with the expansion of Medicaid and those who are becoming eligible," says Vitale of Beaumont. While there was confusion stemming from computer glitches in the sign-up process for the uninsured last November, Vitale says he is concerned about "added costs going forward."

Like many hospital executives, Vitale is uncertain about how many of the young uninsured will sign up for care. "They view themselves essentially as bulletproof, and they go bare until they have an issue. They'll have this huge bill that will have to be settled; a lot of it will become bad debt," he says.

One certainty is that there will be winners and losers. Some hospital executives are moving cautiously, waiting for any more legislative changes. Others believe there is no time to waste and are heading rapidly toward their chosen plan.

For those moving ahead, they are forming medical homes, patient-centered care models, and population health centers through accountable care organizations; they are expanding outpatient facilities, enhancing specialized care, and focusing on forming community teams, especially with a revamped primary care base, to better address avoidable admissions, readmissions, preventive care, and risk-based contracts, says Michener.

A major area of concern is not only for the welfare of patients but for the economic consequences as hospitals focus on readmissions. As part of the national Hospital Readmissions Reduction Program, established by the PPACA, the Centers for Medicare & Medicaid Services began to reduce payments to hospitals with excessive readmissions, effective October 2012.

Targeting readmissions

Henry Ford Health System took specific steps that led to patient readmission reductions, and hopes to set the stage for improved coordination not only among its own healthcare team but also outside hospital walls through medical homes and population health management, Conway says.

One of the major focus areas involves decreasing 30-day readmissions for heart failure patients. The cardiac telemetry unit at Henry Ford Hospital uses a patient education program about heart failure and a postdischarge phone interview program for patients within 24–72 hours of discharge to verify that medications are being taken and a physician follow-up is scheduled.

In a review last year of 185 patients over a 5-month period, the hospital found that 77.3%, or 143, were admitted with the primary diagnosis of heart failure. The 30-day readmission rate was 10.5%, and the home care referrals rate was 72.8%, according to hospital reports.

Conway says hospital officials have been aggressively focusing on care coordination. To address the "medical, social, and financial aspects" of hospital readmission issues, the system leadership established the care coordination initiative in 2012. The purpose was to standardize care coordination and transitions throughout the Henry Ford Health System to "provide seamless care to each patient at every stage and point of care."

The initiative involves projects and teams that focus on specific disease states and "crucial points" of patient care transition. It includes transition nurse coordinators to focus on patients with a high risk of readmissions, and a heart failure readmissions team—including cardiologists, nursing staff, case managers, and pharmacists—that conducts heart failure classes for inpatients and discharged patients, makes phone calls to patients after discharge, schedules primary care physician appointments within 7 days of discharge, and provides educational materials and home care referrals with telehealth monitoring.

Henry Ford Hospital has gradually reduced all-cause readmissions from 2011 through 2013. Its readmission rate was 15.6% in 2011, 15.1% in 2012, and an unofficial 12.9% during 2013, while figures were still being tabulated. Its 2013 target was 14.2%.

For the entire Henry Ford Health System, it reports that the readmission rate dropped from 13.1% in January 2011 to 11.2% in June 2013, well below the 2012 average national rate of 18.4%.

Even as HFHS has reduced readmissions, it still has been hit by CMS penalties. But those penalties are decreasing steadily, Conway says. A hospital system report shows that penalty fees for federal fiscal year 2013 totaled $2.2 million, but the hospital system had reduced penalty fees slightly for fiscal year 2014 at three hospitals, to less than 1%. The CMS penalty fees for 2014 applied to excessive readmissions for acute myocardial infarction, heart failure, and pneumonia.

"Those steps will continue," Conway says of the efforts to reduce readmissions. He cites especially important steps: "more aggressive internal screening of admittance requests to avoid insurer rejections" and deploying "30 nurse case managers to our primary care practices for the medical home model. They closely monitor patients at high risk for admission to keep them out of the hospital."

ACO focus: Population health

The 1,321-licensed-bed WellStar Health System based in Marietta, Ga., is a large integrated system with five hospitals and seven urgent care centers and plenty of competition. The 169-bed Cheshire Medical Center/Dartmouth-Hitchcock Keene is a smaller organization that includes a community hospital and medical practice associated with Lebanon, N.H.–based Dartmouth-Hitchcock Medical Center.

At both WellStar and Cheshire Medical Center, leadership focuses on physician involvement, controlling readmissions, and using the ACO model. In WellStar's case, inpatient discharges remained flat (down 0.5%) between fiscal year 2010 and fiscal year 2013. At Cheshire, inpatient volume has been down significantly, about one-third over the past few years.

"Managing the readmission rate is a key priority," says Chris Kane, senior vice president of strategic business development for WellStar. He says there has been an 8% readmission rate for all causes, which has been a target. Overall, he says, the nonprofit system had inpatient volumes that were "flat" from 2012 to 2013, although observation cases increased 9%.

With the ACO, it has focused on managing its service lines to allow physician leadership and managers to design clinical plans for each area, Kane says. By "having formalized 11 clinical service lines, our physician leaders are literally at the table when opportunities are evaluated," which is integral to overall patient growth, he adds.

"In metro Atlanta's competitive market, we have learned that sustained growth only occurs with flawless tactical execution," Kane says. "Now success demands a precise plan about the market segment, the basis for differentiation, and the economics. Although health systems have always had a planning process in place, the stakes are higher now because of margin pressures."

The organization has 500 primary care providers, specialists, and advanced practitioners in its WellStar Medical Group's 100 locations. WellStar's outpatient services have accounted for a growing percentage of its revenue, up to 54%.

"A broader definition of primary care is also essential for the execution of the strategy. We have added urgent care centers, developed a partnership with Walgreens, and evaluated other business models," Kane says.

As system officials review technological improvements, "the difference in the decision-making about technology is the expanded role of physicians," he says.

A significant element in WellStar's planning involves different ways of allocating its resources, and that's where the ACO model is effective, Kane adds. WellStar has a partnership with Piedmont Healthcare to better coordinate care. "We want to be in the fast lane in health management." WellStar and Piedmont have created the Georgia Health Collaborative, which may expand delivery systems. WellStar has an ACO with nearly 40,000 Medicare lives.

"The objective was not to receive an ACO T-shirt from CMS. Rather, the ACO designation forces an organization to allocate resources to learn a new approach," Kane says. "All of these strategies underscore a commitment to management of the health of a defined population.

"Aligned physician incentives are a central theme in our strategy. Physician employment continues to grow for multiple reasons. Although employment permits the highest level of alignment, few health systems can rely entirely on employed physicians to succeed," Kane says. "At WellStar, we focus on creating parity between our employed physicians and affiliated independent physicians. All physicians are involved in our service lines and have a voice."

WellStar's health strategy is focused on outpatient care; the organization has committed nearly $200 million to a "health parks" concept, which would feature several 200,000-square-foot outpatient campuses in the community. Several were in the planning stages in 2013. "Patients are looking for the three C's: clinical excellence, convenience, and coordination. Our health parks are designed to meet these expectations," Kane says.

Kane foresees a healthcare landscape that will involve more partnerships and mergers. As the health system moves forward, "in many respects healthcare is like a middle school dance. The music is playing and you are nervously looking for a partner," he says. "It may be one dance or a long-term relationship, but either way, you feel compelled to do something."

ACO focus: Reducing admissions, costs

In New Hampshire, Cheshire Medical Center/Dartmouth- Hitchcock Keene has been caught in the wave of shifting patient volumes and has seen inpatient admissions drop by about one-third over the past several years, says Art Nichols, the president and CEO. And that, he says, isn't such a bad thing.

"Between the hospital and our physicians, we took a hit that already hit our census: It has declined," Nichols says. "From around 2009 to now, our inpatient census is down about one-third, maybe slightly more than that. That's what happens when you have a group of physicians trying to keep people out of the hospital."

Physicians have been working closely with healthcare leaders to reduce the amount of time people are spending in the hospital. In 2007, the organization was involved in a pilot physician group practice demonstration that Nichols describes as a "precursor to accountable care."

Cheshire Medical Center/Dartmouth-Hitchcock Keene is among 32 groups selected by the Centers for Medicare & Medicaid Services' Innovation Center to participate in the Pioneer ACO model. The program, which began in 2012, identifies whether improving care in a "proactive and coordinated manner" also reduces costs. In 2012, the Dartmouth-Hitchcock project generated approximately $2.5 million in savings as part of the Pioneer model.

"We got a jump on the whole notion of accountable care and because of that our physicians have developed some skills to keep people well and keep them out of the hospital," he says. "We've been about 50% below the national average for Medicare readmissions for many years now."

In particular, patients with coronary disease and diabetes were among those who "tended to be admitted over and over again, and those are the ones that we've tried hard to keep out when not necessary," Nichols says. "We already have risk-based contracts with many of our insurance companies, and it begins to make a difference when you bring the commercial piece into the equation and you reach a point where a higher census is not necessarily a good thing for the hospital. You are being paid a fixed fee for care for patients, not quite capitation, not far from it. It's very hard for a hospital to get over the idea that fee-for-service is not forever. I know it's a hard thing to get over."

Cooperative agreements have opened the door for the hospital to expand its reach into the community and improve its population health. In fact, the hospital is encouraging people who live within the area of 3,165-foot Mount Monadnock, through an initiative with its physicians group dubbed Healthy Monadnock 2020, to help Cheshire County become the healthiest community in the United States by 2020. The county has 23 towns and 76,851 residents.

The plan, years in the making, includes government and civic policy changes that officials hope will prompt its schools, workplaces, and towns to make healthy choices about how they eat, exercise, and take care of themselves. Thousands of people are involved in keeping track of their own health by measuring their commitment to lose weight and get fit. While schools are revamping their menus to maintain nutritious dining fare, local planners are drawing up sketches for sidewalks and parks to encourage residents to walk and run.

Ultimately, Cheshire Medical Center/Dartmouth-Hitchcock Keene and local physicians are helping people "create an awareness" of their own health, says Nichols.

"We're not unlike a lot of other communities; we are the only hospital in our county," Nichols says. "When you are the only hospital in the market and are a significant provider, I feel there's a responsibility to that market. We don't want to wait for people to get sick and show up in our offices or emergency room. That's not enough to do our jobs."

Nichols says the hospital also is developing more medical home models in the community with primary care physicians. By reaching out to government agencies and civic groups, the hospital is making integral steps to touch each person's health. He says the hospital worked with local providers—from general practitioners to dermatologists—to encourage local residents to measure and reduce their blood pressure. Within six months, 68% of residents achieved goals, and that has since increased to 84%, Nichols says.

A primary focus on ambulatory care

The push toward outpatient care reflects one of the most significant shifts of patient volumes. In 2012, outpatient volume continued to "grow at a robust pace" while per beneficiary inpatient admissions continued to decline, according to a 2013 MedPac report to Congress. Inpatient admissions per fee-for-service beneficiaries declined 1% per year from 2004 to 2010. The volume of hospital outpatient services per Medicare FFS beneficiary grew on average by 4.2% per year from 2004 to 2010.

Government incentives "to keep people out of the hospital will have a dramatic impact on inpatient volumes," says Sang-ick Chang, MD, assistant dean for clinical affairs and clinical professor at the 613-bed Stanford University School of Medicine in California.

Stanford's new primary care system has an emphasis on patients with chronic diseases, such as lung disease, asthma, and diabetes, Chang says. The hospital is focusing on ambulatory intensive care for people at high risk for hospitalization." The ambulatory intensive care unit includes providers, social workers, and mental healthcare to give patients the resources they need to keep them out of the hospital, he says.

Often, the patients who are treated have multiple hospitalizations. "We find the reasons often have to do with patients' social circumstances, their family support, and the patients' motivation" for care, he says.

Unlike some areas of the country, Stanford's patient population includes many who are insured and have their own primary care doctors. Located 35 miles south of San Francisco, Stanford is in the heart of Silicon Valley. Too often, Chang says, many patients simply see specialists or subspecialists directly for their care. Increasing patients' access to primary care physicians "helps avoid duplication and unnecessary or unwanted treatment, and helps patients navigate multiple specialists," he adds.

To improve its primary care base, Chang says the hospital is planning various "medium-sized community-based primary care practice" centers throughout the area. "The ambulatory capacity has resulted in growing demand for primary care," he says.

"To meet the demand, the providers will be closer to patients' homes rather than being at the medical center," Chang says. "We understand that as much as patients value the name Stanford, they also value time and convenience. The hospital also has opened the door for after-hours in an office setting," he says.

Across San Francisco Bay, Kaiser Permanente, based in Oakland, has been considered one of the leaders in integrated systems and aligning incentives in shared-savings plans and coordination with physician groups. Kaiser includes the Kaiser Foundation Health Plan and Kaiser Foundation Hospitals.

Kaiser, too, has looked closely at "upstream ambulatory care prevention," and such programs are important in reducing hospital admissions and lengths of stay, says Jed Weissberg, MD, FACP, senior vice president for hospitals, quality, and care delivery excellence.

Kaiser focuses on risk-factor management for heart, kidney, and stroke patients. Its home health programs have had a major impact on hospitalizations, Weissberg says. "We continue to see the readmission rate drop and the overall day rate decline. The overall Medicare inpatient day rate declined over the past three years from 1,000 to 700 days per 1,000 members," Weissberg says, "which was beyond what we thought was achievable."

Kaiser also is evaluating needs for more focused care for the elderly that it hopes will result in "better attention to the general needs of the frail and sick," Weissberg says. For instance, Kaiser physicians are stepping up coordination with other caregivers to deter fall prevention, improve osteoporosis diagnosis, and evaluate dementia and delirium, he says.

Kaiser Permanente's Transition in Care program was initiated to target readmissions and is designed to meet the principles of a complex adaptive system, such as stratifying patients by risk of readmission, creating a standard discharge summary, and reconciling medications across the continuum of care.

In addition, the program calls for a posthospital discharge hotline, scheduling a patient to see a doctor within seven days of discharge ordering a palliative care consultation for high-risk patients as appropriate, and conducting a case conference if a patient has a complex disease. A Kaiser report indicates that since the program was implemented in 2012, its absolute readmission rates declined by 3%.

Kaiser also is focusing on improved community and social care, determining whether patients need transportation or nutrition services. Medicine is not always the answer for care, Weissberg says. "We have to look at lifestyle and environmental factors, as well as what we think about medication adherence."

Confidence and challenges

Beaumont Health System is a perfect example of a system that is confident it can handle the shifting patient volumes but faces additional challenges based on an uncertain future. Its Royal Oak, Mich., hospital is a 1,070-staffed-bed major academic and referral center, its Troy hospital has 418 staffed beds, and its Grosse Point hospital has 250 staffed beds. The hospitals' medical staffs have more than 3,100 physicians. The system has ambulatory surgery centers, physician office buildings, and a home care division. Its postacute management has been growing.

"We can really take care of a full spectrum of a patient's experience for episode care management," Vitale says. He points to the organization's nimbleness when it needed to make the acute rehabilitation changes at its Troy facility: "For managing a population, we are positioned quite nicely."

And Beaumont is doing something else to help in its value-based care, such as reducing the number of readmissions, but Vitale says, "there are other factors working against us at the same time."

As Beaumont begins to prepare for the shifting volumes, one of the first things it will be looking at is dealing with potential reductions in admissions, with issues inside and outside the hospital walls. "We've taken our best stab at estimating what the impact and the shifts will be, and factored into long-range planning how we can offset losses. We will need to adjust estimates and see in reality what's going to happen."

Beaumont and other hospitals are facing regulatory issues involving observation units that have an impact on how they are caring for patients. Such units have increased significantly, as hospitals hope to improve their patient flow and reduce costs. Beaumont Health has been adding them through much of its system, with 50% more patients classified as observation over the past three years, according to the hospital.

Many healthcare leaders are concerned that CMS is revising guidelines for what can be classified as inpatient admissions. "CMS and other payers are making it harder and harder to classify inpatients coming in the door; they are changing the criteria of allowable inpatient admissions," Vitale says. "CMS continues to change the rules, and it is difficult to stay up to date." Under a new policy, if a patient is not in bed two consecutive midnights, he or she would automatically be considered outpatient, Vitale says.

"That will hurt most providers significantly, because we get paid about three times as much for an inpatient than we do for an outpatient stay."

The observation issue is among the challenges hospitals are trying to address as they confront the impact of shifting patient volumes, Vitale says. There is much uncertainty, he says. "I think most folks are like we are; we don't see anybody building new bed towers or things like that."

Reprint HLR0314-2

This article appears in the March 2014 issue of HealthLeaders magazine.