Over the years, hospitals have dealt with declining occupancy rates by closing beds, floors and even entire wings.
Now, some hospitals are facing a much different situation: They're crowded.
So crowded, in fact, that this winter 299-bed Holy Cross Hospital in Chicago had to hold some patients in its emergency room for more than 24 hours until an inpatient bed was found, says Mark Clement, the hospital's president and chief executive officer.
"We were packed," he says.
When hospitals experience an influx of patients, managing volume becomes as important as managing care.
Without some discipline and planning, a bump in inpatient business won't bolster the bottom line. While some hospitals can keep their profits rising right along with their patient load, others have watched margins sink in the face of complex reimbursement systems, the assumption of risk and the inefficiencies inherent with increased demand.
More space needed. Pan American Hospital in Miami is one place feeling the pinch of more patients.
In fact, the 144-bed hospital is so busy it's having to build a new $2.5 million wing with 16 additional beds.
Construction is expected to start in July.
At an admissions peak in February, the hospital was running at more than a 92% occupancy rate, says Carolina Calderin, the hospital's CEO. The hospital's occupancy rate was 88.5% in January, 86% in March and 89.1% in April.
Just recently, she says, the hospital had to hold 26 patients in its emergency room for two days until inpatient beds could be found.
A community not-for-profit hospital, Pan American serves a largely elderly patient base, with more than 52% of its clientele covered by Medicare, Calderin says.
Last year, although Pan American saw its net patient revenues grow by more than 7% to $66.1 million from $61.5 million in 1997, its operating income dropped 8% to about $5 million from $5.4 million in 1997, according to financial data the hospital provided.
But Calderin doesn't blame the income drop on operational difficulties associated with being busy.
Instead, she attributes the decline to the hospital's costs in purchasing two clinic buildings.
Reversing the trend. The inpatient uptick at the nation's acute-care hospitals follows 14 years of consecutive declines in the number of beds, according to American Hospital Association data.
The number of acute-care beds has dropped 16% to 853,000 in 1997 from a high of just more than 1 million in 1983.
While some of the recent crowding is seasonal because of flu outbreaks or an influx of tourists, beds are tight at other hospitals because growth strategies have helped them to strengthen their patient base.
In addition, a recent report suggests that hospitals may be at the start of a trend of rising occupancy rates.
In 15 years, hospitals could find themselves with more patients than beds, says the report from Sutro & Co., a San Francisco-based investment bank.
Driving that trend, the report says, will be the baby boomers, who will consume more healthcare services as they age.
With payment systems based on admissions and per-diem rates, an increase in occupancy could mean higher profitability for hospitals, according to the report.
"Hospitals have high fixed costs associated with bricks and mortar," according to the report. "With greater patient volumes, hospitals may be able to spread these fixed costs across a larger revenue base, thereby sustaining or even improving profitability."
However, the report points out that under a capitated payment system, higher patient volumes aren't a positive development without increases in the payment rates.
James Bentley, the AHA's senior vice president for strategic policy planning, says he sees no evidence that hospitals are too lean on the inpatient side or that communities are concerned about overcrowding.
But times have changed for hospitals that want to trim beds, Bentley says.
When facilities were obviously underutilized, hospitals could shed beds with no real worries. But today, because the stock of beds has been reduced, "they need to worry about the peaks and valleys" of admissions, he says.
Profits and care. Christ Hospital and Medical Center in Oak Lawn, Ill., a suburb of Chicago, is one of those facilities that has been able to maintain its operating profits while caring for more patients.
"It's not anything esoteric," says Robert Pekofske, vice president of finance for Christ. "It's blocking and tackling."
One tactic Christ uses is what Pekofske calls "economic sizing." That means the 626-bed hospital uses standardized staffing in some units while relying on swing units that are staffed according to patient loads.
By standardizing staffing, the hospital avoids being understaffed when it's busy. This helps Christ reduce overtime pay and lessens the hospital's reliance on expensive per-diem workers. Christ is part of Advocate Health Care, an eight-hospital system based in Oak Brook, Ill.
During this year's first quarter, Christ has seen its average daily census increase more than 6% to 525 patients, compared with a census of 494 patients for the same quarter a year ago.
In 1998, admissions at Christ rose 5.4% to 33,142 from 31,452 in 1997. This year Christ expects a slight increase, to 33,300 admissions.
Pekofske says the hospital's average daily census increased because sicker patients are being hospitalized longer. As the hospital's average daily census has grown, so has its length of stay, to 5.6 days this year compared with 5.3 days in 1998.
The hospital has seen its operating numbers grow along with its patient load.
In 1998, Christ's net patient revenues rose almost 6% to $375.4 million compared with $355.6 million in 1997, according to financial data provided by the hospital. That translated to about a 2% increase in operating income to $17.2 million last year compared with $16.9 million in 1997.
Christ's payer mix is 30% Medicare, 50% managed-care, 10% Medicaid, and 10% all others, including self-pay and workers' compensation. Only 2% of the hospital's business is capitated, resulting from one commercial and two Medicare HMO plans, Pekofske says.
No panacea. Filling beds with patients hasn't been a panacea for 315-bed Mount Sinai Hospital Medical Center, which serves an inner-city neighborhood of Chicago.
"We are losing money despite the fact that we are so busy," says Benn Greenspan, Mount Sinai's president and CEO.
As many as 70% of Mount Sinai's patients are covered by Medicaid, and about 12% of its patients are uninsured.
During the first few months of this year, Greenspan says his hospital was so crowded that people had a hard time finding available medical-surgical beds.
Despite the boom in business, he says the hospital is sure to finish the fiscal year, which ends June 30, in the red.
Last year, Mount Sinai managed net income of $156,000-despite an operating loss of $2.8 million-on net patient revenues of $163.2 million, according to HCIA, a Baltimore-based healthcare information company. Philanthropy helped the hospital keep its head above water, a hospital spokeswoman says.
California expansion. Even in California, known for its dominant HMOs and intense pressures to keep inpatient care to a minimum, some hospitals are getting fuller.
California Pacific Medical Center in San Francisco, for example, acquired rival Davies Medical Center last July in large part to gain added space for inpatients.
Combined, the facilities are staffing 475 beds, says Jim McCaughey, vice president of business development.
In this year's first quarter, California Pacific, including patients at the Davies campus, posted an average daily census of 342, giving the hospital a healthy 72% occupancy rate.
And the trend toward higher occupancy rates is statewide, says Bruce Spurlock, M.D., executive vice president at the Sacramento-based California Healthcare Association, which represents more than 630 hospitals, health systems and physician groups.
"Occupancy is 10% to 20% higher than it was two years ago," Spurlock says.
He notes that many California hospitals are moving away from capitated managed-care contracts. Patients' length of stay, particularly in maternity units, is also on the rise. And there is a strong, but unexplained, surge in the overall number of patients needing hospital care.
Perhaps "we've reached a plateau in our efficiency in treating people outside the hospital," Spurlock says.
Reopening. Chicago's Holy Cross Hospital didn't have to put out the "No Vacancy" sign this winter because it reopened a 20-bed wing of the hospital that had been closed.
The wing reopened in January and, because the hospital was so busy, it remained open seven days a week, instead of the four days per week originally expected.
At its peak, Holy Cross had 233 patients one day in January, Clement says. That meant every adult medical-surgical and critical bed was occupied.
Clement says admissions were up 11% in January, 14% in February and 13.5% in March over the same months last year.
The increased number of patients didn't tank the hospital's bottom line.
In January, Clement says, the hospital had a profit margin of about 4%. It fell to 2.5% in February but was back up to 4% in March. Clement expects to finish the year with a margin of between 2% and 2.5%.
Being busy hasn't been as profitable for Evanston Northwestern Healthcare, a two-hospital system in suburban Chicago. The system has 478 staffed beds between its Evanston (Ill.) Hospital and Glenbrook Hospital in Glenview, Ill. The occupancy rate has been about 85%.
The system's patient revenues, which include only inpatient and outpatient care, skyrocketed 15% to $525 million in fiscal 1998, ended Sept. 30, from $458 million in fiscal 1997. At the same time, the system's net income from total operations plunged 36% to $16 million in 1998 from $25 million in the previous fiscal year, says Ray Grady, the system's president of hospitals and clinics.
The outlook isn't much brighter for fiscal 1999.
The system anticipates patient revenues will grow to $600 million, while operating income will slump even further to $13 million.
"Even though we've got some positive trends, we are not immune to the risk that all hospitals face in this industry," Grady says.
Over the past two years, the system's inpatient business has grown 6% and the outpatient side has increased 11% he says.
Grady says the Balanced Budget Act of 1997 cost the system $5 million in lost Medicare reimbursement during its last fiscal year. This year the system expects to lose about $6.2 million more.
"While we're still doing well, it's getting tough. . . to do well," Grady says.
-With Chris Rauber