Editor's Note: This story has been corrected to reflect that DispatchHealth expanded to Kansas City, Kansas, not Missouri.
Pandemic-driven shifts in care trends threaten hospital margins as telehealth and fewer emergency room visits have further changed the way people access care, Moody’s said in a report this week.
A drop in inpatient care is expected due to a number of factors including changing reimbursement models, advances in drugs and medical devices and growing investment in outpatient services. This shift, however, will be partially offset by an aging population and demand for higher-acuity care by patients whose care was delayed by the pandemic.
Even before COVID-19, hospital admission rates were generally flat, according to Moody’s; now, virtual care options and fewer visits to the emergency room have accelerated the shift away from inpatient care. The use of telehealth will likely remain higher than before COVID, particularly among certain specialties, Moody’s projected.
Outpatient revenue has exceeded inpatient revenue in the past few years, according to Moody's analysis.
The use of at-home acute care services will continue to grow. As a result, specialty care hospitals will be better off than others going forward.
While some hospitals and health systems were already using at-home acute care models before the pandemic, many more will look to provide acute care services at patients’ homes. In 2021, Mayo Clinic and Kaiser Permanente invested in Medically Home to help hospital and health systems reinvent their delivery systems by developing complex care at home models that would offer flexibility and scale.
Last year, those three organizations and 11 not-for-profit health systems launched the Advanced Care at Home Coalition to convince Capitol Hill to extend telehealth, remote and in-home care flexibilities.
Other health systems also are ramping up programs to provide hospital care at patients' homes. At-home health care startup DispatchHealth inked a new deal with AdventHealth to bring the former’s technology into Florida and Kansas homes.
Moody's also noted that hospitals nationally are accelerating investments in outpatient services. Many not-for-profit hospital systems have already partnered with leading players in outpatient care including telehealth, urgent care as well as ambulatory surgery centers (ASCs), such as Allina Health System partnering with Optum's Surgical Care Associates to develop ASCs while Ascension Health is working with Regent Surgical Health to expand its ASC footprint.
At the same time, several for-profit providers, including Tenet Healthcare Corp.'s United Surgical Partners International, Envision Healthcare Corp.'s AmSurg, Surgical Care Affiliates, HCA Inc. and Surgical Center Holdings Inc., are among the largest ASC consolidators, putting them ahead in certain markets.
Reimbursement is increasingly shifting to risk-taking or outpatient care models. Payers, both commercial and governmental, will continue incentivizing providers to move toward less expensive outpatient settings like ASCs, possibly restricting hospital care with denials of coverage. And, with more risk-taking models, hospitals will increasingly share financial risk with payers, further driving the need for care in the most cost-effective setting, Moody’s said.
As part of its focus on value-based care, the Centers for Medicare & Medicaid Services introduced reimbursement changes like observation stays that give providers time to evaluate whether inpatient admission is necessary.
This, however, has burdened revenues and will continue to do so, because they are considered outpatient services, which are reimbursed at a lower rate. Excessive hospital readmissions will also penalize reimbursement. At the same time, new drugs and medical devices will help reduce hospitalizations and hospital procedures, typically for high revenue-generating services, which will further reduce hospital operating income.
Hospitals such as academic medical centers with a strong focus on quaternary and tertiary care—highly complex cases requiring greater levels of specialty care—will be better able to sustain demand for inpatient services than hospitals offering primarily less complex, or secondary care, Moody's said.
In the near term, many hospitals will see greater demand for inpatient services because of a rise in the number of higher-acuity patients who delayed care during the pandemic. Beyond the effects of the pandemic, an aging population will help drive the need for inpatient care. In addition, hospitals in markets or states with strong population growth, such as Florida, Texas, Arizona, Utah and Idaho, will, all else being equal, likely see stronger overall volume trends, including on the inpatient side.