Shifting reimbursement both an issue and opportunity for healthcare

Changes in reimbursement remain a central concern for hospital and healthcare leaders today, but leaders are optimistic and encouraged about the future of the industry.

At the Becker's Hospital Review 7th Annual Meeting in Chicago on April 28, healthcare leaders shared both the issues and opportunities they face this year on a panel moderated by Rhoda Weiss, PhD, nationally recognized consultant, speaker, educator, and author.

Barry Arbuckle, PhD, president and CEO of Fountain Valley, Calif.-based MemorialCare Health System, said shifting reimbursement is a natural process of the business, and it's a change that should be happening.

"We need to get people to the right venue of care," Dr. Arbuckle said, outlining MemorialCare's push to ambulatory, community-based centers. Often, patients of independent physician groups typically wouldn't seek care from a hospital outpatient department; rather, they'd go to a community-based ambulatory center. As hospitals and health systems acquire these physician groups, the hospital outpatient department becomes a cash cow for hospitals where both Medicare and commercial payer rates are higher than they would be in an ambulatory setting, according to Dr. Arbuckle. While these rates may increase reimbursement for hospitals, it also elevates total costs of care, something healthcare is trying to lower.

"We're creating a lightning rod for the industry because we're actually increasing the cost of care," Dr. Arbuckle said. As such, he said MemorialCare is spearheading initiatives to have patients seek care in those ambulatory centers instead of the hospital outpatient department. "We've been very zealous about pushing business into community-based ambulatory, market-priced centers, even though it represents a dip in revenue for us."

However, the push has helped MemorialCare increase market share, Dr. Arbuckle said, as it extends the organization's reach into the community. At the same time, it frees up space in inpatient or outpatient areas for patients that really do need to be there.

Gregg Beeg, CFO of Oaklawn Hospital in Marshall, Mich., said reimbursement change can be especially problematic for smaller hospitals such as his, a 77-bed independent hospital, as they navigate the shift from inpatient to outpatient. "Insurance companies continue to want to ratchet that reimbursement down," he said.

What's more, Mr. Beeg's hospital faces the economic uncertainty tied to the rocky state of Michigan's finances and how employee retention poses a burden to hospitals. "Michigan went through some very challenging economic times, the state has lost a lot of its population, some of it's coming back. [We're trying] to get access to some of those people and staff members."

Mr. Beeg said the hospital is already facilitating 70 percent of its care in the outpatient arena. Now, Oaklawn Hospital is looking at increased competition with other ambulatory surgery facilities in the region that are also responding to reimbursement changes.

The market pressures to open and operate in facilities outside the four walls of a traditional hospital are also affecting Toledo, Ohio-based ProMedica. Randy Oostra, president and CEO of ProMedica, said the health system is strategizing how to rationalize inpatient consolidation and moving to outpatient over a period of time.

"The idea down the road is how do you begin to think about rationalizing, consolidating [or] maybe not doing everything at every location," Mr. Oostra said. ProMedica is opening six urgent care centers, largely in response to other healthcare organizations in the market doing the same thing. "We didn't want to just give that away," Mr. Oostra said.

All these changes are indicative of more than just a shift away from inpatient and toward outpatient, according to Mr. Oostra. "Rather than think of it as a shift to outpatient, really it's just a shift to provide care in a different way than we have before. …I'm not sure you'd call it outpatient anymore," he said. "It's a shift from inpatient…to providing access, whether that access is an urgent care center, a doctor's office, emergency room, freestanding ER. It's really trying to meet people where they are."

While providers are facing these challenges, suppliers, too, are trying to keep up, said Jake Crampton, CEO of MedSpeed, a healthcare transportation company. "From a supplier vantage point, we're worried about the same things, but it's about pacing," Mr. Crampton said.

In regards to the shift to the outpatient setting, Mr. Crampton said he sees this trend in many of his customers, adding that he is "sympathetic to the vagaries of the revenue models." As hospitals shift to the outpatient side, Mr. Crampton's company has to figure out how to operationalize and deliver their services alongside their hospital partners.

"All these things that need to be there for clinical care to happen, those are all designed to serve hospitals," Mr. Crampton said. Suppliers like MedSpeed have to ramp up their services to work with several hundred facilities instead of just a handful of hospitals.

"If you don't get it right, you're going to have gaps in care," Mr. Crampton said. "Our focal point is on trying to work with our customers to work on that standardization to that outpatient environment."

Changes to reimbursement, among the myriad other changes healthcare faces, are significant pressures on healthcare organizations, but these challenges also help shift leaders' strategies from reactive to proactive.

Dr. Weiss asked panelists what keeps them up at night, and Dr. Arbuckle said it is this exact change.

"From a healthcare perspective, I think it's keeping up with the pace of change," Dr. Arbuckle said. "It's change that's not necessarily happening to us; it's a change that we're demanding of ourselves."

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