A big factor behind the taming of runaway inflation in health-care costs has been the sea change in the way hospitals operate.
Once patients were admitted for days, if not weeks, of diagnostic tests, pre-operative workup and postoperative recuperation. Now only the most radical surgeries require more than 72 hours of hospitalization, and lesser procedures are accomplished with no overnight stay whatsoever.
Pressured by insurance plans to cut costs (and by research that shows patients get well faster at home), competitive hospitals have refocused staff and facilities toward outpatient, or ambulatory, care.
Surgeries that had always required hospitalization, such as gallbladder removal or hernia repair, are now done on a walk-in, walk-out basis. Progressive hospitals have opened “day hospital” units where outpatients are prepped for surgery in the morning, monitored for recovery during the afternoon and sent home in time for the 10 o’clock news. Follow-up care, from dressing changes to physical therapy, is delivered at home or at an outpatient clinic.
The ambulatory revolution has produced enormous savings, and at no discernible cost in medical outcomes. It was a good and necessary change. Nevertheless, some hospitals in the forefront are getting hammered for their troubles.
Virtually all insurance plans pay less for outpatient services, a practice that needs to be rethought. By far, the worst is Medicaid, the federal-state plan for the poor. The Illinois Department of Public Aid’s outpatient fee schedule has not been updated in more than six years, nor does it contemplate the sophisticated procedures now being done on an outpatient basis. It has, for example, paid hospitals $6,000 to remove an inpatient’s gallbladder but only $801 to remove an outpatient’s. The former covers about 85 percent of the hospital’s cost, the latter only 20 percent.
Earlier this year the state’s own Outpatient Reimbursement Advisory Group, a blue-ribbon panel created to study the problem, concluded that Medicaid pays the average Illinois hospital only 40 percent of what it costs to provide outpatient care. This creates a powerful incentive for hospitals to do the wrong thing–to admit patients for procedures that could be performed in their ambulatory clinics.
The same advisory group has recommended that some $120 million be added to the state’s Medicaid budget over the next two years to help hospitals, particularly Medicaid-dependent urban hospitals, stop the fiscal bleeding. Because children’s hospitals have been hardest hit, a coalition of five institutions, led by Children’s Memorial in Chicago, is asking for a separate and immediate infusion of $20 million.
Both groups argue the state will recoup this expense once hospitals know they won’t be punished for moving to outpatient care. That’s why the Illinois House and Senate appropriations committees need to dig deep, and why the public aid department needs to rewrite its outpatient reimbursement plan.
Hospitals should not be punished for doing the right thing. Nor should taxpayers, whose private insurance insists on outpatient efficiency, be forced to extend the era of hospital-as-hotel.
