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How Hospitals Are Reinventing Themselves

Philip Betbeze, for HealthLeaders Media, June 6, 2014

Inpatient care is still a bedrock of almost all health systems, but its role in the care continuum is changing dramatically.

This article appears in the May 2014 issue of HealthLeaders magazine.

Trying to envision the hospital of the future in the context of the changing healthcare landscape is a bit like trying to envision the future of the internal combustion engine in the automobile industry: They won't go away, but they'll be a smaller and smaller piece of the whole as time goes on.

The successful healthcare entity of the future might include one inpatient hospital or several, but that modality of care—the most expensive—is also likely to decline in importance to the whole as the dust settles from the vast array of changes healthcare reform brings with it.

In many respects, the movement away from the inpatient setting for many organizations is long underway. Many describe this shift almost as an investment diversification strategy: You don't want the majority of the income for your organization coming from a declining business line.


The Hospital of the Future is Not a Hospital


But what was once a diversification strategy has morphed into much more. As health systems seek to influence all sites of care for populations of patients, developing and integrating lower-cost sites of care is perhaps the most critical piece of creating a financially successful health system for the world of 10 years from now and beyond.

But what does this mean for the future of inpatient care? Many organizations are expanding quickly into the outpatient arena, managing and coordinating care among a variety of settings, and even considering developing a completely vertically integrated organization that includes a health plan. Others are anticipating that, with drastic changes in reimbursement, they may be better off actually cutting services to focus on those they provide most efficiently.

Of course, there's no universal template that will create the appropriate mix of services, access locations, and clinical modalities for all systems any more than there ever was. But positioning the organization for survival—let alone growth—is critical, and determining the proper place for inpatient investment is vital.

Strategic positioning

Most experts and senior leaders seem to agree that the inpatient setting will decline and outpatient care modalities, which are cheaper and more convenient for patients generally, will ascend. In order to provide healthcare sustainably well into the future, that has to happen, but it doesn't mean that transition will be easy on healthcare organizations.

"It's fair to say that in any large urban market, you're going to see significant shifts in bed days per thousand over the next five to 10 years," says Keith Alexander, CEO at 426-licensed-bed Memorial Hermann Memorial City Medical Center, one of 12 hospitals in the Houston-based Memorial Hermann system.

In fact, Alexander possesses data that projects the decline. Bed days per capita are already falling, even in a market—greater Houston—that adds the equivalent of the city of Detroit (700,000) to its population every 10 years. Over the past five years, the number of admissions per thousand in Houston has dropped to "well below 100 per thousand," Alexander says. "Our projections have that going down to low 80s over the next 10 years. That's a function of shifting more and more toward outpatient, and from CMS moving inpatients more to observation status, among other things. It's a phenomenon all over the country."

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