Financial Implications: The Push from Inpatient to Outpatient Care

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Drusilla Short
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1 Financial Implications: The Push from Inpatient to Outpatient Care Brian Baumgardner & Mitchell Mongell THE TRANSFORMATION TO CONSUMER-DRIVEN HEALTHCARE

2 FINANCIAL IMPLICATIONS:THE PUSH FROM INPATIENT TO OUTPATIENT CARE

3 NOT SO LONG AGO,PHYSICIANS AND SURGEONS PREPARED PATIENTS FOR INPATIENT STAYS WHEN GOING IN FOR A MEDICAL OR SURGICAL PROCEDURE. THOSE TIMES HAVE CHANGED. ACCORDING TO A 2013 REPORT FROM MOODY S INVESTORS SERVICE, AMBULATORY SERVICE CENTER CASES HAVE BEEN GROWING SINCE 2007, WHILE HOSPITALS HAVE SEEN INPATIENT SURGICAL CASES DECLINE.22 PERCENT ANNUALLY.

4 ACCORDING TO PRELIMINARY MEDICARE CLAIMS, INPATIENT DISCHARGES HAVE DECLINED 17% SINCE 2006, WHILE OUTPATIENT HAS INCREASED 33%.

6 THE DECREASE IN INPATIENTS IS PARTIALLY EXPLAINABLE BY THE HEALTHCARE REFORM. PRESSURES BY HEALTHCARE PAYERS FOR MORE COST EFFECTIVE CARE HAVE PUSHED PATIENTS TO AN OUTPATIENT MODEL. ADDITIONALLY,ELECTIVE ADMISSIONS DROPPED DURING THE RECESSION AND WERE SLOW TO RECOVER. HEALTHCARE REFORM BROUGHT PRESSURE ON HOSPITAL READMISSIONS AND ALSO ON AVOIDABLE ADMISSIONS. MEDICARE S TWO MIDNIGHT RULE HAS ENCOURAGED SHORT STAYS TO BE REGISTERED AS OBSERVATION. ADVANCES IN TECHNOLOGY, PARTICULARLY IN IMAGING, SURGERY, AND ANESTHESIA HAVE MADE IT SAFER FOR PATIENTS TO RECEIVE CARE IN AN OUTPATIENT SETTING.

7 WHAT IS INPATIENT STATUS? PHYSICIANS AND HOSPITALS FOLLOW A SPECIFIC SET OF CLINICAL CRITERIA THAT ASSISTS IN DETERMINING WHETHER A PATIENT MEETS MEDICAL NECESSITY FOR AN INPATIENT STATUS IN A HOSPITAL. FOR MEDICARE, THE PATIENT MUST REQUIRE TWO MIDNIGHTS OF CARE IN THE HOSPITAL. WHAT IS OBSERVATION STATUS? OBSERVATION IS AN OUTPATIENT STATUS IN WHICH A PATIENT OCCUPIES A BED AND IS OBSERVED. IT IS SHORT TERM, LESS THEN 48 HOURS. THERE IS ALSO SPECIFIC CRITERIA THAT IS UTILIZED TO DETERMINE WHETHER A PATIENT MEETS OBSERVATION CRITERIA. FOR MEDICARE, A PATIENT WHO WILL OCCUPY A BED FOR LESS THAN TWO MIDNIGHTS WOULD BE APPROPRIATE FOR OBSERVATION.

8 HOW ARE HOSPITALS ADJUSTING TO THE CHANGE IN INPATIENT TO OUTPATIENT LEVELS? THEY ARE DIVERTING REVENUES TO THESE SETTINGS. INVESTMENTS IN AMBULATORY SURGICAL CENTERS, STAND ALONE EDS, AND URGENT CARE CENTERS ARE JUST EXAMPLES. SOME HOSPITAL BASED SYSTEMS ARE NOW SEEING OVER 50% OF REVENUES GENERATED OUTSIDE OF THE INPATIENT SETTING.

9 BUILDING OUTPATIENT SERVICES SUCCESSFULLY HAS ITS CHALLENGES. FOR ONE THING, THERE IS INCREASED COMPETION FROM NEW ARENAS SUCH AS CVS, WALGREENS,TARGET, ETC. THESE RETAIL GIANTS HAVE DEVELOPED WALK IN MEDICAL CLINICS TO TREAT MINOR INJURIES AND AILMENTS, DIVERTING PATIENTS AWAY FROM EDS AND URGENT CARE CENTERS. ANOTHER CHALLENGE FOR HOSPITALS MAY BE A LACK OF TIES TO COMMUNITY BASED PHYSICIANS. GROWTH OF HOSPITALIST PROGRAMS HAS CHANGED THE ENVIRONMENT OF BOTH PHYSICIAN AND PATIENT UTILIZATION.

10 REVENUE DIFFERENCES BETWEEN INPATIENT AND OBSERVATION? PER OIG ANALYSIS OF CMS DATA,2013: ON AVERAGE, MEDICARE PAID NEARLY THREE TIME MORE FOR A SHORT INPATIENT STAY THAN AN OBSERVATION STAY AND BENEFICIARIES PAID ALOMOST TWO TIME MORE. IN TOTAL, MEDICARE PAID $5.9 BILLION FOR SHORT INPATIENT STAYS, AN AVERAGE OFR $5,142 PER STAY. IN CONTRAST, IT PAID $2.6 BILLION FOR OBSERVATION STAYS, AN AVERAGE OF $1,741 PER SWTAY. FOR EACH OF THE MOST COMMON REASONS FOR THE STAYS, THE AVERAGE PAYMENT WAS ALWAYS HIGHER FOR SHORT INPATIENT STAYS THAN FOR OBSERVATION STAYS.

11 WHAT IS THE INITIAL IMPACT OF MEDICARE S TWO MIDNIGHT RULE? HOSPITALS ARE SEEING APPROXIMATELY 7.5% FEWER INPATIENTS. PATIENTS ARE HIT WITH 20% COPAYS PLUS THE COST OF SELF-ADMINISTERED DRUGS (USUAL HOME MEDS). OBSERVATION DAYS DO NOT COUNT TOWARD MEETING THE 3 DAY REQUIREMENT FOR SNF.

12 HOSPITALS ARE SEEKING TO REDUCE COSTS AND IMPROVE QUALITY BY SEEKING NEW RELATIONSHIPS WITH PAYORS VIA PAYMENT MODELS THAQT REWARD VALUE. MODELS SUCH AS ACCOUNTABLE CARE ORGANIZATIONS (ACO) AND BUNDLED PAYMENTS ARE STRATEGIE3S TO ALIGN INCENTIVES FOR LOW COST AND HIGH QUALITY CARE. SOME PAYORS ARE AGGRESSIVELY PURSUING ACO TYPE ARRANGEMENTS TO LOWER COSTS. THESE ARE USEFUL STRATEGIES BECAUSE THEY FORMALIZE THE COORDINATION OF CARE- IT REQUIRES A LEVEL OF PARTNERSHIP BETWEEN THE HOSPITAL, THE PHYSICIAN, AND THE PAYOR.

13 IN ADDITION TO PARTNERING WITH PHYSICIANS AND PAYORS, HOSPITALS ARE PARTNERING WITH COMMUNITY ORGANIZATIONS TO COORDINATE SERVICES FOR PATIENTS ALONG THE CARE CONTINUUM. COLLABORATING AND BETTER MANAGEMENT OF THE TRANSITION OF CARE IN THE COMMUNITY CAN HELP HOSPITALS IMPROVE COMMUNITY POPULATION HEALTH.

Accountable Care Organizations Understanding What They Are and How to Structure Them

Accountable Care Organizations Understanding What They Are and How to Structure Them Maria T. Currier HOLLAND & KNIGHT LLP Miami Chamber of Commerce Healthcare Subcommittee December 7, 2010 Copyright 2010