U.S. hospitals appear to be undergoing yet another in a series of transformations, according to a new report by the San Antonio-based healthcare consulting firm, Frost & Sullivan.
In the 128-page report, “The Transformation of the American Hospital: 2015-2020,” the authors describe the rapid evolution of hospitals since the passage of the Affordable Care Act in 2010 and its impact on the payment, quality and delivery of services.
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Projecting through 2020, Patrick Riley, a senior healthcare analyst at Frost & Sullivan, said services will continue to migrate outside of hospital doors and predicted hospitals will increasingly contract more with retail clinics and physicians to capture a large portion of that business line. Riley, who co-authored the report with Senior Research Analyst Tanvir Jaikishen and Frost & Sullivan Vice President Siddharth Saha, said, as a former hospital executive, he was surprised to learn how well U.S. hospitals were performing financially in light of the reimbursement, regulatory and competitive challenges facing them in recent years.
“They’re responding to operational challenges and the dictates of legislation affecting their revenue cycles to become more collaborative within the medical community,” Riley said.
He said the movement to home- and community-based care is impacting hospitals in different ways.
“Hospitals in the states that elected to expand Medicaid under the Affordable Care Act have benefited by expanding coverage within to cover nearly their entire populations,” he said.
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Riley added:
Other states, like Texas, that did not, continue to see 30 percent to 40 percent of their populations without health coverage. The states that did expand saw some costs come down, improvements in population health and better quality outcomes. The states that did not expand Medicaid turned down billions of dollars in federal spending to improve access to care, immunizations and many other things that improve the health of a population. Those improvements did not take place in the states that did not expand Medicaid.
He said that rural hospitals, however, have been particularly hard hit in the states that did not expand Medicaid coverage to more citizens, noting that at least 60 such facilities have closed in recent years.
“They used to be reimbursed by the federal government for disproportionately treating larger numbers of poor and uninsured patients,” Riley pointed out. “But after the ACA was passed, to incentivize states to expand their Medicaid programs, the feds cut back on those DSH [Disproportionate Share Hospitals] payments and many rural hospitals really suffered.”
Riley said despite increases in the numbers of patients with chronic conditions and a growing population of aging baby boomers, hospital inpatient days have dramatically declined. He said the way hospitals are reimbursed for payment continues to evolve.
How will hospitals of tomorrow make their money? More hospitals are participating in private and federal Medicare shared savings agreements, such as Accountable Care Organizations (ACOs), in which groups of providers like hospitals, physicians and nursing homes share the risks and rewards for coordinating the care of large patient populations.
“This has proven to be working, and now we’re seeing the entry of major payers into the ACO structure,” Riley said. “Payers are coming in because we’re all headed towards total capitation, the Holy Grail for them. That’s why you see the numbers of covered lives in ACOs growing exponentially.”
He predicted that hospitals will continue to collaborate in population health initiatives.
“That allows hospitals more data and more control to minimize their risks,” he said. “The incentives are now in place to do the right thing.”
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