Health systems struggle to fill beds amid care delivery shifts

Many hospitals and health systems struggled to maintain inpatient admissions in 2022, adding to financial woes already compounded by labor shortages and higher operating costs.

Three years into the COVID-19 pandemic, industry watchers are doubtful inpatient volume will ever fully recover to pre-pandemic levels amid the ongoing transformation in care delivery. One big factor at play: the overarching shift toward outpatient care, typically a cheaper option for patients and providers. Health systems continue to invest in ambulatory centers and reserve hospital beds for more complex, higher-acuity cases. 

However, outpatient care often means less reimbursement from payers, and as a result, may not be enough to plug the financial holes left by fewer inpatients. There is also the rise in telehealth services, including hospital-at-home programs designed to keep people out of inpatient facilities. 

For 2022, a slew of health systems reported fewer inpatient admissions, or at best, a marginal increase compared with 2021. The systems, including Tenet, Renton, Washington-based Providence and Rochester, Minnesota-based Mayo Clinic, sustained billions of dollars in income loss, with many ending the year at a net loss.

Staffing shortages prevent some systems from operating full inpatient units, but even if they are at full staff, capacity constraints at lower-level care sites keep patients stuck in hospital beds until other options become available. 

"Twenty years ago, the typical American hospital may have had 60-65% of its revenue from inpatient activity, and now they generate most of their revenue, 50% plus, from outpatient. In some cases, it's significantly more than that," said Mark Pascaris, director at Fitch Ratings. 

Pursuing growth strategies based on the patient mix from even a few years ago doesn't make sense, Tenet Healthcare CEO Dr. Saum Sutaria told investors at this week's Barclays Global Healthcare Conference. 

Pascaris said the question now is whether losses in inpatient volumes are permanent as the industry adjusts to a post-pandemic "new normal." He doesn't expect to see volumes rebound to pre-pandemic levels, but they will likely improve in 2023. The long-term implications will become more evident in 2024 and 2025, he said.