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The future of hospital inpatient volumes

Experts discuss the continuing decline of hospital inpatient volumes

Since the recession first began in 2008, hospitals and health systems have continually seen a drop in inpatient volumes. Most industry experts say they expect more of the same for the rest of 2014 and even the next five years or so.

Analysts at both Moody’s Investors Service and Standard & Poor’s predict a continuing decline in hospital inpatient volumes due to a number of different factors, including a large shift to care in outpatient settings rather than inpatient.

[See also: Moody's report shows decline in healthcare utilization due to employee benefits changes]

Steve Gelineau, senior vice president for hospital management consulting firm the Camden Group, explained that he attributes the decline in inpatient volumes to seven different factors, some more prevalent than others:

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1. Elective admissions dropped during recession and have been slow to recover. Gelineau explained that many workers lost insurance coverage when the country’s workforce was initially reduced in 2008, while others have remained reluctant to take time off from work for elective procedures.

2. Health reform brought pressure on hospital readmissions and also avoidable admissions.
“We all know there’s been a growing pressure on hospitals to reduce unnecessary readmissions,” said Gelineau. “Another factor pushing down volumes is the pressure to keep patients away from the inpatient side of the hospital if avoidable.”

[See also: Moody's: Non-profits aren't losing any strength]

3. The growth of observation status. Gelineau explained that most hospitals have utilized their observations units for patients that aren’t quite ready to return home yet but no longer need to be in the inpatient unit.

4. There has been a long-term continuing movement towards outpatient models of care with less use of beds overall.

5. As hospitals shift towards fee-for-value away from fee-for-service, they are building clinically integrated networks and care models. Gelineau added that hospitals are increasingly emphasizing prevention and proactive care, especially for patients with chronic ailments, which make up a majority of the costs and services provided in the healthcare system today.

6. The growth of technology, particularly when it comes to imaging, surgery and anesthesia.
“Advances in these areas continue to make it safer and safer for patients to receive most care on an outpatient basis,” said Gelineau.

7. An ongoing birth rate decline. While this is a smaller factor, births are always inpatient hospital stays, and a reduction in the birth rate leads to reductions in admissions, explained Gelineau.

Kevin Holloran, director of U.S. Public Finance for Standard & Poor’s, and Martin Arrick, managing director of U.S. Public Finance for Standard & Poor’s, echoed Gelineau as far as the factors leading to declining inpatient volumes go, adding that each of these trends are most likely long-term factors that are unlikely to reverse, even with the so-called rapidly-aging “boomer” population.

Arrick explained that focusing on physician recruitment and internal referrals can be important ways for hospitals to try to maintain some of their inpatient levels, despite the ongoing downward trends.

Kevin Kennedy, a member of management consultant company ECG’s board of directors and head of ECG’s Northwest Healthcare practice, said that it’s important for hospitals to “understand what they’re in for and what the future holds and looks like. With that level of understanding, most of our clients have decided to embrace the future.”

He added that hospitals are to going to need to invest in their outpatient facilities if they haven’t started to already.

“Many are realizing that they truly have to be part of a health system that emphasizes outpatient care because it’s the part of their systems that will continue to grow right now,” said Kennedy. “It’s important to invest in a network of ambulatory care in a much lower cost setting for patients.”

Kennedy explained that while the inpatient and outpatient decline and growth trends are “hard for traditional hospital structures to get their arms around, increasingly we’re seeing more systems recognize themselves embracing ambulatory care settings and giving these outpatient units the same levels of input as inpatient units.”

[See also: S&P says U.S. not-for-profit healthcare sector is stabilizing]