The pandemic accelerated the trend of healthcare moving into outpatient care settings, forcing health systems to look for tactics to maintain their bottom line.
The pandemic has created a multitude of challenges for hospitals, but an increased shift toward lower-cost outpatient or in-home care is threatening organizations' revenue growth and margins, according to new research by Moody's Investors Service.
Traditionally, inpatient care revenue has been the measure of presence and market share in the industry for hospitals and healthcare systems.
Between a rise in telehealth and fewer emergency room visits, the report finds that traditional hospital-based care is becoming less of the norm, as outpatient revenue has exceeded inpatient revenue in the past few years.
Though this trend has been prevalent for years, COVID-19 has caused an acceleration, with Moody's identifying changes in reimbursement models, risk-sharing, investment in outpatient services, and advances in drugs and medical devices as contributing factors.
Telehealth boomed in the early stages of the pandemic, increasing 63-fold during 2020, according to the Department of Health and Humans Services data cited by Moody's. While telehealth hasn't sustained that usage as in-person visits have returned, it will continue to be an access point many patients opt for, particularly for certain specialities, the report said.
At-home acute care models are also expanding, with many hospitals and health systems striving to provide services in patients' homes. In May 2021, Kaiser Permanente and Mayo Clinic invested in Medically Home to help systems reinvent their method of delivery of complex care.
"These models would allow some providers, such as critical-access hospitals, to reduce inpatient beds and costs but allow others, such as academic medical centers, to increase inpatient capacity where needed," Moody's said.
Mayo, Kaiser, and Medically Home, along with 11 nonprofit health systems, launched the Advanced Care at Home Coalition in October 2021 to extend telehealth and remote services.
Moody's reports that hospitals are also investing in outpatient services such as ambulatory surgery centers (ASC). Several nonprofit hospital systems have already created partnerships to develop or expand their ASCs, like Allina Health System joining Optum's Surgical Care Associates, and Ascension Health working with Regent Surgical Health.
Meanwhile, multiple for-profit systems, like Tenet Healthcare's United Surgical Partners International and Envision Healthcare's AmSurg, are among the largest ASC consolidators, putting them ahead of nonprofits in certain markets.
Additionally, Moody's points to several other factors that will play significant roles in the shfit to outpatient care.
- Reimbursement changes to hospitals. Payers will continue to incentivize providers to offer less expensive outpatient care, potentially further restricting hospital care with denials of coverage.
- CMS' decision. By removing certain orthopedic and cardiac procedures from its inpatient-only list, CMS is further driving treatment to hospital-based outpatient departments or ASCs. CMS also introduced hospital penalties for excessive readmissions for certain conditions, as part of the 2010 Affordable Care Act.
- Advances in drugs and medical devices. The need for hospitalizations will reduce as new orthopedic technology bolsters outpatient procedures.
In the immediate future, however, many hospitals will see a greater demand for inpatient services due to higher-acuity patients who delayed care during the pandemic, Moody's said.
Long term, the hospitals best positioned to sustain demand for inpatient services will be those that focus on quaternary and tertiary care, such as academic medical centers. Moody's also views markets as a factor, with hospitals in regions like Florida, Texas, Arizona, Utah, and Idaho likely continuing to experience strong overall volume.
Jay Asser is an associate editor for HealthLeaders.