Across December we have been sharing our framework for helping health systems rethink their approach to investment in delivery assets, built around a functional view of the enterprise. We’ve encouraged our clients to take a consumer-oriented approach to planning, starting by asking what consumers need and working backward to what services, programs and facilities are required to meet those needs. That led us to break the enterprise into component parts that perform different “jobs” for the people they serve. We think of each of those parts as a “business”, located at either the market, regional or national level depending on where the best returns to scale are found (and on the geographic scale of any particular system). First we shared our view of the “access business”, pushing systems to create a broad web of access points across their market, with the goal of building consumer loyalty over time. Last week we described our vision for the “senior care” business, where an array of assets traditionally providing postacute care, including rehabilitation and skilled nursing facilities (SNFs), home health, and even hospital-at-home programs, could expand their capabilities to manage chronic disease exacerbations in elderly patients in lower-acuity, lower-cost settings. This week we’ll describe how the changes in these outpatient care settings will affect the profile of the traditional acute care hospital.
Shifting demographics will dramatically change the patient mix of American hospitals across the next decade. As Baby Boomers age into their Medicare years, ED and hospital beds will fill with elderly patients admitted for exacerbations of chronic diseases like congestive heart failure and diabetes, their care reimbursed at public-payer rates. Over time it’s easy to imagine hospitals starting to look like giant SNFs, filled with elderly patients receiving nursing care and drugs. With current cost and labor structures, this shift will be financially unsustainable for hospitals, as Medicare payment for many medical admissions does not cover the cost of the inpatient admission, forcing hospitals to pursue alternative care settings for these patients. As we described last week, as many as half of chronic disease admissions could be managed by an expanded “senior care” platform. Adding to this potential shift of medical admissions to an outpatient setting, we anticipate that an expanded postacute and home care platform could also accelerate the shift of inpatient surgeries to an ambulatory setting. If surgery centers could manage patients for 24- to 48-hour stays, and hospital-at-home capabilities supported recovery at home, some experts believe that a majority of non-emergent inpatient surgeries—including many orthopedic and general surgery cases—could shift away from the hospital. If this shift to alternative settings bears out, demand for traditional “med-surg” beds could decline significantly, even in the face of demographic shifts.
The graphic below describes an alternative vision for the future acute-care hospital that takes into account these changes. This “hospital of the future” will be asset-light, focused on providing higher levels of emergency, medical and surgical care, with capacity weighted toward more intensive patient management. The acute care facility will be supported by a network of connected and expanded ambulatory resources, including outpatient surgery, postacute services, home care and access services, all enabled by remote monitoring technology. While payment changes covering expanded outpatient care will accelerate this movement, we believe that payer and patient mix shifts alone will provide motivation for hospitals to pursue these strategies. The cost of adding a new med-surg bed now tops $2M in most markets—trimming even a few beds that may not be needed will provide capital that can go a long way in expanding outpatient capabilities to support lower-acuity care.