Closing low-volume hospitals could mean higher quality care, lower costs

In an era of healthcare reform, the industry can achieve higher quality care and better outcomes for patients by closing and consolidating low-volume hospitals, according to an article by Robert Pearl, M.D., CEO of The Permanente Medical Group in California and a contributor to Forbes.

Although consolidations and closings are painful and most hospitals will resist them at first, Pearl said they are necessary to drive down costs of care and boost quality, even when patient volume increases at remaining hospitals. 

These changes are necessary, he said, because they world has evolved since the establishment of community hospitals, which came about because of the difficulty and expense of travel in the early 1900s. The number of hospitals in America grew from 4,300 in 1909 to 7,200 by 1970 to cope with the introduction of the Medicare and Medicaid programs, which drove up demand for patient services and hospital costs. However, in the 1990s, outpatient care, managed care and high costs for hospital stays forced hospitals to shut down or merge to survive. Low-volume facilities are now struggling to stay open, while high-cost facilities limit utilization, according to the article.

Now that distance and travel aren't a problem for the vast majority of Americans, more patients going to fewer hospitals, possibly a little further away from their homes, allows for more staff and expanded, non-stop services, Pearl said. The result, he noted, will increase quality and improve patient experience.

Pearl gave the example of Silicon Valley, a 50-mile stretch that encompasses 14 hospitals, some located just one mile apart, including academic medical centers, two hospitals that are part of a larger health system and 10 community hospitals.

The highest volume facility had nearly 800 cardiac surgeries in 2011, while the lowest had just 57 surgeries. Combined, seven of the 14 hospitals performed fewer than 150 heart surgeries. These hospitals accounted for just 20 percent of the surgeries performed in the Valley, although they averaged more risk-adjusted deaths, according to the article. However, the mortality rates for the two highest-volume facilities were half the hospital average, Pearl said.  

He suggested closing half the facilities to save money on the cost of paying the nurses, technicians and other staff at the low-volume hospitals and drive up the quality at the remaining seven hospitals while driving down the care costs. To combat a powerful hospital hiking care prices, Pearl suggested increased transparency, reference pricing and availability of centers of excellence programs.  

Merged hospitals also can cut back-office costs and redirect those funds toward electronic medical records systems and physician practices, FierceHealthcare previously reported. 

To learn more:
- read the article

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