Move over, earnings and cash on hand. Revenue per admission is the financial metric that's making a splash lately.
And the strategies hospital chains are enacting to boost that metric—hiking prices and attracting sicker patients—appear to be paying off.
First-quarter results from the country's largest investor-owned chains—Tenet Healthcare Corp., HCA Healthcare, Community Health Systems, Universal Health Services and LifePoint Health—show they're finding success in squeezing more money out of each patient encounter. Same-hospital revenue per admission increased by 3.5% on average during the quarter.
"It was uniformly so high, so it surprised everybody," Ana Gupte, senior analyst and managing director of healthcare services with Leerink Partners, said of the patient acuity that hospitals saw at the outset of 2018, reported as revenue per admission. "I think we're all trying to figure out why it was so good."
Increases in revenue per admission are driven largely by two factors, experts say: higher prices and sicker patients. It makes sense that as patients increasingly migrate to lower-cost, more convenient outpatient settings, hospitals will see the most severe cases. Hospital chains are actively working to capitalize on that by adding high-acuity service lines in some markets to ensure they'll rope in those sicker patients.
Dallas-based Tenet reported the strongest increase in revenue per adjusted admission in its hospital sector, 4.1%, a positive metric that executives attributed to higher acuity. Eric Evans, Tenet's president of hospital operations, said during the company's first-quarter earnings call on May 1 that its acuity growth is particularly strong in the cardiovascular and trauma sectors, service lines the chain recently expanded.
"We do think it's sustainable," he said.
HCA saw the second-highest increase in same-hospital revenue per admission in the quarter, 3.9%. Sam Hazen, chief operating officer of the Nashville-based chain, attributed the increase to several factors during the company's May 1 earnings call: higher prices, a better payer mix and the expansion of high-acuity service lines, including burn and trauma units, neurosciences and stroke care. HCA also recorded more surgeries in other high-acuity service lines like cardiovascular and orthopedic services, he said.
"We've been talking about this being a core element of our strategy for the last four or five years," Hazen said. "This is some of the yield from that."
Still, the strength seen in that number was noteworthy to some. Brian Tanquilut, a healthcare analyst with Jefferies & Co., said he expected to see lower revenue per admission in the first quarter, as the beginning of the year is typically saturated with flu cases, which tend to be lower acuity and, thus, lower revenue per admission. "That was probably the biggest surprise," he said of the growth in revenue per admission.