The low-acuity arms race among health systems is on
Under the reality of softening patient admissions and insurers pushing customers to lower acuity environments, providers are looking toward urgent care investments.
Second quarter earnings were not kind to most providers. Whether it was continued losses, flattening revenues or weaker-than-anticipated results, most providers felt a sting or two as the earnings season wrapped up.
Tenet Health reported a net loss of $56 million while Community Health Systems (CHS) reported a $137 million loss in Q2 2017, and that's an improvement from a loss of $1.4 billion during the same period last year.
It's clear healthy hospital financials largely depend on admissions numbers. HCA Holdings reported revenues in the black at $10.32 billion, bolstered by admissions growth, but the company stated the earnings in the first half of the year were still below expectations. Cleveland Clinic more than tripled its operating income in Q2 year-over-year thanks to higher patient volumes.
It's that acknowledgement that likely has pushed providers such as HCA, CHS and Tenet to invest in lower acuity environments such as urgent care centers and freestanding emergency departments. These investments can help balance out the decreasing organic patient growth as they are placed in populous, convenient locations and appeal to millennial's healthcare utilization patterns.
Urgent care centers have a baked-in bonus of offering brand recognition and driving patient referrals if different levels of care are needed. And as payers nudge providers to think about appropriate care settings, pushing care to a lower acuity environment when appropriate makes urgent care settings an important step for health systems moving farther into population health.
Declining emergency department volumes are causing health systems to rethink their outpatient strategies
Many of the larger for-profit health systems experienced weaker-than-expected patient volumes in Q2. Tenet disclosed a 4.5% decline in total admissions for the first six months of 2017 and anticipate adjusted admissions to be flat or down 2% when 2017 closes, down from an anticipated up 1% or down 1%. CHS reported softening admissions and a 2.5% decrease in volume for adjusted admissions in Q2 and disclosed same-store hospital adjusted admissions is expected to decline 2% for its full-year guidance.
While HCA's Q2 earnings were buoyed by admissions, a decrease in lower acuity visits contributed to a 0.9% decline in hospital-based emergency visits. CHS saw a similar trend where 90% of its emergency department (ED) volume decline was on the outpatient side. This was attributed to "industry dynamics, including urgent care growth, freestanding ED competition in select markets."
"In our hospitals and outpatient centers, we experienced the same soft volume that affected other companies in our industry," Tenet CEO Trevor Fetter stated during an earnings call.
With the decline in outpatient services, it's no shock that these larger systems are making moves and investing in lower acuity settings. In fact, an April survey from The Advisory Board Company noted the primary concern among hospital executives was improving patient access to ambulatory or outpatient settings. CHS, Tenet and HCA all mentioned a greater eye toward the space under the banner of providing greater patient care access. Some key quotes from the recent earnings reports:
"We remain focused on our access point expansion strategy with a solid development pipeline heading into 2018, which includes 13 freestanding EDs, over 40 urgent and walk-in care centers, and 9 ASD projects." - Tim Hingtgen, president and COO at CHS.
"We are continuing invest in our markets in making sure that we have very convenient, easy access points, whether it’s for ER or urgent care from the hospital side." - Eric Evans, president of hospital operations at Tenet.
"We clearly want the lower acuity business somewhere in our system. That's why we're investing heavily in urgent care, and we continue to invest in freestanding emergency rooms, because it allows us to develop a relationship with our patients and ultimately integrate them inside the HCA system." - Samuel Hazen, president and COO at HCA.
Refocusing to scale out access points
While certain systems are divesting assets in the face of softening admissions, many health systems are looking to expand their access points to capture more patients and drive referrals. CHS and Tenet, for example, both in their earnings call expressed interest in growing and maintaining properties in more desirable markets. Both organizations have already begun to act upon this by ramping up planned hospital divestitures.
Before the passage of the Affordable Care Act, MedStar Health envisioned rough seas ahead while predicting increasing co-pays and high deductibles would affect future patient volume and uncompensated care rates. To get ahead of the curve, the system created MedStar 2020, an action plan to push the organization from a 10-hospital system with a strong acute care base to a distributed delivery model.
A big component of the plan is to meet consumers where they work, live and play, Bob Gilbert, president of MedStar Ambulatory Services at MedStar Health, told Healthcare Dive. "We are convinced healthcare is going to the model of population health," he said, adding, "I think urgent care is sort of a harbinger of things to come."
This consideration of consumers will be important for the health systems' strategies. Consumers are demanding convenience over care service hours and locations and urgent care centers present a cheaper alternative to EDs, Dr. Rita Numerof, president and co-founder of Numerof & Associates, told Healthcare Dive.
Gilbert views the tides shifting to where healthcare organizations take responsibility for managing the health of a population and ensuring patients get to the appropriate level of care.
"We view [urgent care centers] as access points for us," Gilbert said, adding MedStar has put up 14 urgent care centers in five years. "We've seeing close to 150,000 visits in those urgent care centers last year," he said. "Those were visits we probably wouldn't have seen six years ago."
He noted urgent care centers look to be a good investment area, as they are in the middle of the road between primary care offices and emergency rooms, and can offer convenience. For one, emergency room wait times can be too long and such visits are costly. Gilbert says a visit to an urgent care center can be a couple of hundred dollars while a visit to the ER could cost a couple of thousand.
On the other end of the spectrum, it can also be difficult to schedule a timely primary care visit as demand for healthcare services grows, a result of more individuals become insured or aging into needing care services. The underlying dynamic is the increase in urgent care centers reflects primary care offices may not be as responsive to patient needs, according to Numerof.
Committing itself to ensuring patients get the right level of care, MedStar has integrated communications across some acuity levels to triage care level assessment. Gilbert says the system is seeing an increase in the acuity of patients at their urgent care centers, with about 5%-8% of admittances ending up in the hospital. MedStar is able to communicate between the levels of acuity and ask for second opinions to determine the right level of care.
"I think it reflects the value of having an urgent care center as part of a health system" compared to a standalone entity, Gilbert said. As noted, other systems are interested in how to leverage such environments as well.
A quick look into the state of urgent care centers
According to Amino's data on 6,240 urgent care facilities (870 of which are hospital-based urgent care centers), hours of operation vary nationwide. Fewer than 40 locations are open 24 hours a day — less than 1% — while 38% of urgent care centers in the U.S. are open past 5 p.m., seven days a week.
Urgent care centers tend to be concentrated in populous, metropolitan areas where organizations can reap the benefits of being placed conveniently close to a large number of people who may need health services at any given time. Cities such as Houston, Miami and Columbus, Ohio, boast the most urgent care centers.
According to Amino, the median age of someone going to an urgent care center in 2016 was 53 years old. Younger individuals tend to be healthier and utilize healthcare services much less than older populations, so it's not surprising that people 17 years old and younger made up 17.4% of urgent care visits in 2016, while millennials made up 15.7% of visits.
However, being able to capture both a young person in need of emergent care because of an accidental bone fracture and a 53-year-old needing to tend to an injury from a fall is an attractive option to a business seeing softening patient admissions and reimbursements.
Two reasons urgent care centers are more important than you think.
1) Millennials don't care about a primary care provider relationship.
That's at least according to Amino data. Consumption of healthcare is pulling providers in the direction of low acuity environments such as urgent care. Millennials are choosing not to have primary care provider relationships, David Vivero, CEO and co-founder at Amino, told Healthcare Dive. According to Amino's data, millennials are choosing emergency care services over primary care services.
Because that emergency care service utilization is so high, providers will try and shift those care delivery services to a lower cost environment, such as an urgent care center, as they think about managing healthcare costs. "That's why urgent care is so valuable, and I think the reason health systems also believe urgent care is so valuable," Vivero said. "Having a less intense type-of-care portfolio of services if you're a health system makes a ton of sense."
2) Urgent care centers could help with value-based care initiatives.
The push from volume to value in the industry has created incentives for providers and insurers to push care from EDs to lower acuity environments when appropriate to help bend the cost curve. For example, Anthem made big waves last month when it announced it would no longer pay for MRIs and CT scans performed by hospitals in an outpatient setting. The decision was made in part to push patients to even less expensive care environments and came after the insurer announced it would no longer cover ED services in Missouri if deemed unnecessary.
Urgent care helps with spending and utilization costs, as those centers offer the ability to provide services in a less expensive care environment than emergency departments.
"Hospitals generally want to decant their emergency rooms," Dr. Randy Gordon, managing director at Deloitte and former chief medical officer at Bon Secours Health System, told Healthcare Dive. As providers take on more capitated risk, the importance of understanding healthcare costs and where to place patients will be incumbent upon providers.
"To manage costs, you have to actively manage them and understand options and go to the right types of care," Vivero said. In part, that's why MedStar picked the distributed care model, according to Gilbert. "It's flexible and not beholden to a certain payment model," he said.
For MedStar, as population health movement continues, the system's focus will be its distribution system and getting patients the right care at the right place, according to Gilbert.
Whether its a larger system catching on to the urgent care wave or an entrenched system furthering its distribution model, urgent care centers will likely be front and center in the minds of healthcare executives as they manage the health of their patient population.
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