Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 7, 1993 TAG: 9303050137
SECTION: BUSINESS PAGE: F-1 EDITION: METRO
SOURCE: By MARIANN CAPRINO ASSOCIATED PRESS
DATELINE: LENGTH: Long
HOSPITALS COURT OUTPATIENTS TO SHORE UP REVENUE
Not long ago, patients entering McKay-Dee Hospital Center in Ogden, Utah, for outpatient procedures were met with the requisite paperwork. And a map.With it - and modest navigational skills - they would wend their way to radiology or the blood bank and then back to the nurses' station.
Today the paperwork remains, but the map is history. McKay-Dee wants to offer outpatients one-stop care, and that requires changes from relocating equipment and reconfiguring surgical suites to expanding the parking lot.
"Traditionally, outpatients were stepchildren," said Suzanne Richins, McKay-Dee's director of surgical services. "Now they're not shuttled everywhere."
Hospitals historically have relied on high fees charged to patients who spend the night. But retaining the growing number of patients whose treatment requires no overnight stay will be critical to their financial well-being in the next decade.
Those who pay the bills - employers, the government and the insurance industry - are insisting on shorter hospital stays to tame runaway costs, leaving hospitals with a surplus of beds and desperate for new revenue sources.
"The payers are putting pressure on hospitals to do as much outpatient as possible," Richins said.
At McKay-Dee, outpatient business is growing at 10 percent a year, while inpatient visits are steadily declining, mirroring a nationwide phenomenon.
"It's certainly important to hospitals' overall financial health to make this shift because hospitals are the single largest expenditure in our health-care system and, with all the emphasis on cost containment, attract the greatest interest," said Linda Aiken, professor of sociology and nursing at the University of Pennsylvania.
Outpatient revenues accounted for about 23 percent of total hospital revenues in 1990, up from 13 percent a decade earlier, according to the American Hospital Association, a trade group. A poll of hospital executives predicted the figure will rise to at least 50 percent by the year 2000.
Likewise, the amount of medical care given to people who never spend the night in the hospital has risen dramatically. In 1990, 52 percent of the nation's 22 million surgical procedures were done in an outpatient setting, up from 26 percent in 1985, the American Hospital Association said.
The trend is fueled by an emphasis on cost containment as well as incentives in the reimbursement system. The government pays hospitals less for outpatient procedures on Medicare and Medicaid patients. But because outpatient treatment is cheaper, hospital profit margins are higher.
The government also has expanded the number of outpatient procedures it will pay for under Medicare from 450 in 1982 to 2,500 today.
Sophisticated new technology that makes surgery less invasive and reduces recovery time has accelerated the shift to outpatient care. A patient who a few years ago would have spent five days in the hospital to have a gallbladder removed in many cases now goes home hours after surgery.
Putting greater emphasis on outpatient care is "perfect for hospitals, because they have these expensive operating suites not working at full capacity," Aiken said.
Some hospitals are seeing bottom-line rewards. American Healthcare Management Inc., which operates 16 hospitals in nine cities, said revenue from outpatient services jumped 18 percent last year. Outpatient surgeries increased 10 percent, while admissions were up just 1 percent. The company, which emerged from bankruptcy protection in 1989, said outpatient diagnostic and surgical services are in highest demand.
The most common outpatient procedures include cataract surgery, gynecological diagnostic procedures, and minor ear, nose and throat surgeries.
The focus on outpatient care is forcing hospitals to be more efficient than in the past, when patients were admitted for days of testing before surgery.
Hospitals are credited with generally having done a good job recognizing the need for expanded outpatient services. But they can't relax.
Competition is stiffening, thanks to the increasing visibility of free-standing surgery centers, which perform outpatient procedures at prices far less than what hospitals charge. A 1990 study by Blue Cross-Blue Shield of North Carolina showed surgery centers charged an average 47 percent less than hospitals for 21 common procedures.
As a result, hospitals' share of all outpatient surgeries declined to 83 percent in 1990 from 90 percent five years earlier, the American Hospital Association says.
Unlike hospitals, surgical centers don't have to maintain cafeterias, kitchens, laundries and beauty parlors. "On a fixed-cost basis, there's less overhead," said Chris Grant, spokesman for Medical Care America, the nation's largest surgery center operator.
He said hospitals have to do five or six times as many cases simply to meet expenses.
When it comes to purchasing everything from latex gloves to sutures, surgical-center chains negotiate directly with vendors, commanding greater discounts than hospitals usually receive.
Of the nation's 1,500 surgery centers, 1,200 are owned by doctors. The remainder are run by companies such as Dallas-based Medical Care America, which has 91 facilities in 26 states and plans to build or acquire more.
"People think surgery centers have been successful over the last 20 years because they cost less," Grant said. "But the doctors have driven this movement. They're frustrated with doing surgery in a hospital. Surgery centers are much more efficient," particularly for doctors who want to maintain a full surgery schedule.
But several lawmakers have noted that many outpatient-care centers have no special licensing or certification. Rep. Ron Wyden, D-Ore., has introduced legislation requiring more regulation.
Wyden asserted that ambulatory care, including walk-in clinics that provide a lower level of care than surgery centers, "provides a fertile environment for medical entrepreneurs who are undertrained, unscrupulous or unethical."
The outpatient-care industry argues that centers accepting Medicare patients must be certified, though many reject Medicare patients. Each Medical Care America center, for example, has Medicare certification as well as a state license. Moreover, any doctor must be licensed to practice medicine.
Logic dictates that the easiest way to control costs would be to keep people out of hospitals, but that's not necessarily so. Sometimes outpatient care can be even more expensive than a hospital stay.
Dr. Neil Schlackman, a medical director for the health-maintenance concern U.S. Healthcare Inc., said his company has noted higher complication rates in outpatient gallbladder surgeries, often requiring readmission to a hospital.
In addition, the less discomforting the procedure, the more people are willing to have it done. Schlackman said U.S. Healthcare has seen costs associated with gallbladder removal rise even though the average stay has declined.
Between 1988 and 1991, hospitalization of U.S. Healthcare's gallbladder patients fell nearly 50 percent, but the cost per 1,000 members was up about 10 percent, Schlackman said.
Some hospitals are looking beyond the outpatient department for ways to boost revenue, including using hospital space for long-term care facilities - essentially high-tech nursing homes.
Others hope to fill beds via in-patient treatment programs for people suffering from depression, substance abuse or eating disorders. Still others want to promote in-house pharmacies to sell drugs and other supplies for patients, such as wheelchairs and crutches.
"The profit margin could be good if you have enough volume," said Aiken, the University of Pennsylvania professor.