Their financial results, however, show that while top-line growth remained strong—largely because of acquisitions and healthcare information technology incentives—hospitals still need to overcome weak admissions and reimbursement pressures.
“The fundamentals for hospitals are OK,” said A.J. Rice, an analyst at UBS. Rice, speaking at the Nashville Healthcare Council's Wall Street event, said hospitals would benefit from an uptick in the economy, which would result in more patients with commercial insurance as well as more demand for the nonurgent healthcare services they had been putting off. “The entire group should do well,” he said.
Last year also highlighted what has become a change in the way hospitals do business as they shift more care to the outpatient realm.
Tenet, for instance, reported its ninth consecutive quarter of growth in its adjusted admissions, a figure that takes into account outpatient and inpatient activity. For the full year, it reported a 0.3% decrease in its inpatient admissions, but a 2.2% bump in adjusted admissions.
The story was similar at other systems. Health Management Associates, Naples, Fla., reported 3.3% admissions growth, but a 9% increase in adjusted admissions for full-year 2012.
A more severe flu season also helped boost emergency department numbers.
HCA, the largest investor-owned chain, reported a 12.7% surge in fourth-quarter ER visits, primarily due to the flu. Vanguard Health Systems, Nashville, also attributed a 6% increase in ER visits to the virus.
Yet while winter ailments brought patients to the ER, they did not translate into higher admissions. In his December volume tracker report, Darren Lehrich, an analyst at Deutsche Bank Securities, noted that for 2012, inpatient volumes declined 1.5% (compared with a 0.9% decrease the previous year), while births, surgeries and outpatient volumes remained stable or increased slightly.
Lehrich also noted a 6% increase in fourth-quarter observation visits across the industry.
One-day stays increased sharply at systems such as Vanguard, which reported an 8% increase in observation visits last quarter, and HMA, which saw a 24% uptick for the quarter and 12% for the year.
In an earnings call, HMA President and CEO Gary Newsome said observation visits may have spiked because of the flu outbreak, pressure from managed care and government payers, Medicare audits and even in response to a December “60 Minutes” segment that alleged it pressured physicians to pad admissions.
Community Health Systems, which likewise saw observation stays rise in 2011 following government scrutiny into its admissions practices, reported in its earnings call that observation stays were relatively flat throughout 2012.
With 2014 in mind, Tenet was one of the first systems to shed some light on how health insurance exchanges might affect its business.
President and CEO Trevor Fetter said in an earnings call that the chain had signed its first contracts for insurance products that will be sold under exchanges. He added that the contracts are with “three large Blues plans” and will cover 15, or roughly 30%, of its hospitals.
“Our position is that the exchanges are a different distribution channel for insurers to sell commercial product to the individual market,” he said. “We do not view them as distribution channels for selling managed Medicare or Medicaid product, since those markets are very different.”