Sometimes being a California company lulls one into a false perception of normalcy. Because of the State’s years as a highly competitive managed care environment, one tends to think that the rest of the country has experienced similar market pressures and developed similar responses. Accordingly, California hospitals have developed a robust ambulatory strategy – admittedly aided by the state mandate requiring hospitals to replace non-earthquake compliant facilities and thus facilitating the reconfiguration of in- and outpatient capacities.
Recently, a client hospital (not in California) admitted that it was not optimally positioned – operationally or facility-wise – for the continuing increase in outpatient volume and needed an effective regional ambulatory strategy. It is well understood that nationally, inpatient volume, particularly cardiovascular inpatient volume, has steadily declined as outpatient volume continues to increase. And yet, for a multitude of reasons including unique financial advantages, operational configuration and facility limitations, some hospitals continue to focus and rely upon traditional inpatient business. Admittedly, it is one thing to recognize a trend of this magnitude, it is quite another to craft a robust comprehensive strategy to transition to what has or is becoming for many providers the “new normal.”
The Challenge of Outpatient Growth
The factors contributing to outpatient growth are many and various; and the financial, operational, and facility implications ominous. As inpatients convert to outpatients, regulatory and reimbursement pressures have continued to mount to negatively impact reimbursement and utilization. We are not suggesting that hospitals have neglected an appropriate ambulatory strategy – the majority have not! But the pressure keeps mounting and the options that once worked need rethinking. Two examples:
- Medicare’s 2017 payment reduction for off-campus provider-based sites, which place severe limitations on a hospital’s ability to maximize reimbursement by applying Hospital Outpatient Prospective Payment System rates to alternative, lower-cost sites
- Medicare’s new BPCI-Advanced payment bundle for 2018, which for the first time includes outpatient procedures, including PCI and cardiac defibrillator
Although key drivers of outpatient growth include reimbursement trends, the search for the “lowest-cost setting” and persistent technologic change, another major factor relates directly to hospital facility design limitations. The vast majority of hospitals in the U.S. were designed and constructed as inpatient facilities with limited outpatient capacity. As hospitals are forced to redesign, replace, expand and adapt to changing utilization, their facility design – hospital, dedicated outpatient, ASCs, on-campus, off-campus, other – will need to emphasize patient access, significant outpatient orientation and capacity. This approach, focusing on organizational and facility solutions (essentially addressing ambulatory capacity issues), is fundamentally “big picture” ambulatory strategy that is best addressed at the health system level.
As outpatient volume grows, and supporting reimbursement established, so do the number and type of hospital competitors for this business – especially physician competitors. The growth of Ambulatory Surgery Centers (ASC), Office-Based Labs (OBL), ambulatory cardiovascular centers and other options is undeniable. The growth of physician-owned/controlled OBLs for example (particularly applicable to peripheral interventions) has been explosive, with an estimated 500+ labs open and 25 new labs opening each month.
Challenging Past Solutions
While the issue may be obvious, the successful solution(s) are much more complex.
- How does one balance inpatient and ambulatory strategies?
- What unique circumstances and market characteristics challenge optimal strategy development?
- Will physicians pre-empt hospital strategy through direct competition for outpatient business?
- What role does technology play?
- How does one handle the transition period when maximizing revenue is all important?
- Are facility limitations holding us back?
- Has patient care re-engineering maximized the in- and out-patient mix, or is it just starting?
- How do we maximize patient access and convenience with regional strategy?
Adding Capacity is Only One Approach
Past solutions have tended to look at the “big picture” and focused on the implementation of organizational/facility solutions to add necessary ambulatory care capacity (while optimizing reimbursement), such as establishing ASCs, dedicated outpatient facilities, off-campus geographically dispersed clinics, working with physician groups to support ambulatory utilization (and dissuading the establishment of competing ventures like OBLs), and the like.
In addition to big-picture issues, more granular, service-line level operational and clinical solutions, are important parallel approaches. These include:
- adapting new technology
- applying best practices
- incentivizing physician participation in such efforts
- patient care redesign (e.g., same-day discharge programs)
- an expanding focus on episodes of care, care coordination across the continuum and integration
In the second part of this blog post, I will address example approaches to enhancing ambulatory strategy directly at the hospital level and within the purview of the cardiovascular service line administrator.
As ambulatory strategy becomes increasingly important, and value-based reimbursement and episode of care models continue to proliferate, hospitals will be challenged to provide enhanced access to care through ambulatory facilities. Cardiovascular services play a vital role in such strategies through maximizing the appropriate applicability of outpatient-related services, insuring access through the distribution of services within its geographic market area, and the operation of such services to maximize both physician participation, integration and the overall patient experience.
If you are interested in learning more about tactics to deal with ambulatory strategies, bundled pricing, cardiac services strategic development, service expansion or low volume cardiac surgery programs and/or other programmatic needs for cardiovascular or other services, please contact CFA at (949) 443-4005 or by e-mail at firstname.lastname@example.org.