As managed-care penetration rises in a market, hospitals get more efficient, more particular about hospitalizing patients and a tad more profitable.
But the percentage of net patient revenues from outpatient activity actually declines as the managed-care heat rises, according to a new analysis of all hospitals studied for the 100 Top Hospitals report.
At first glance, that goes against the conventional wisdom that the percentage would rise as hospitals react to incentives to treat patients in less costly settings.
But there may be an ominous logic to the trend. It may be taking place on a new competitive plane where hospitals no longer are the only game in town, says John Kralovec, M.D., senior principal of the provider consulting group of William M. Mercer.
HMOs still are exerting pressure to keep costs down in highly penetrated markets even though inpatient length of stay and expenses per discharge are tailing off as a result of that pressure (See chart below). Just because hospitals shift their emphasis to the outpatient side, though, doesn't mean they'll capture the growing book of business outside their walls, Kralovec says.
New business configurations such as large physician practices and ambulatory surgery companies are "radically changing the face of how healthcare is delivered," he says.
For this year's study, analysts used data from the American Association of Health Plans to stratify all hospitals into high, medium and low managed-care market groups and compare each group's performance on the nine measures of clinical, operational and financial performance.
The downward trend in hospital outpatient revenues may be the first evidence that alternative delivery sites are siphoning business as HMOs and health plans choose to treat patients in clinical settings outside hospitals, Kralovec says.
Besides offering payers another option, these physician/hospital hybrids are easier to mobilize. "The barriers to entry into the outpatient business is not as significant as it's been for the inpatient business," he says.
The analysis is still more speculation than provable point, says Jean Chenoweth, vice president of HCIA, and it begs additional study to determine what's happening to the hospital outpatients in high managed-care markets. But her gut feeling is: "I think they're going somewhere else."