Economic Analysis of Outpatient Care Centers vs. Hospitals Essay

Big Bend Medical Center is a full-service, not-for-profit, acute care hospital with 325 beds located in Big Bend, Texas. The bulk of the hospital’s facilities are devoted to inpatient care and emergency services. (Gapenski, pg. 27) The outpatient services section of the hospital is used by the Outpatient Clinic, as well as the Dialysis Center. The Outpatient Clinic, which makes up about 80 percent of the outpatient services section, has recently grown in volume and has created a need for 25 percent more space than it currently has. Moving the Dialysis Center to a new building was decide to allow expansion of the Outpatient Clinic. A change and focus on the allocation of costs has some department heads angry and claiming of

costs by the total annual number of inpatient days and outpatient visits to obtain a per episode

Since most specialty procedures are inpatient services, EMC’s inpatient occupancy rate suffers. The occupancy rate for Emanuel Medical Center – fifty percent – is far below that of its competitors and industry benchmarks. To accompany this, EMC (on average) receives a lower reimbursement for in-patient Medicare services per patient seen in comparison to its competitors. A result such as this is correlated with directly to the fewer amount of specialty services that EMC offers. In order for Emanuel Medical Center to be able to compete with other hospitals in its service area, it is imperative that EMC evaluates what services they currently offer and are capable to offer in the future to add value to the hospital, increase its revenue stream, and expand its patient mix. Currently, Emanuel Medical Center has not succumbed to its increasing financial pressurealthough EMC has had a negative operating income for five straight years. A negative operating income places EMC at a disadvantage because it limits the hospitals ability to renovate its aging building or hire new specialists to offer revenue enhancing procedures. EMC’s competitors, on the other hand, have large sources of revenue due to their mergers with large healthcare networks such as Catholic Healthcare West. Another competitor, Kaiser Permanente Modesto Medical Center, has extremely large financial resources due to the fact

The main economic challenge for the healthcare system in the United State will be the rising expenses associated with Medicare and Medicaid. The Governments share of healthcare spending is predicted to rise to 31 percent by the year 2020 (Keehan, Sisko, Truffer, Poisal, Cuckler, Madison, Lizonitz, and Smith, 2011). This may jeopardize the economic stability and financial security of the nation.

The new federal health-care law has raised the stakes for hospitals and schools already struggling to train more doctors. Evidence suggests there won’t be enough number of doctors to treat the newly insured millions under the ACA. At current graduation and training rates, America faces a shortage of as many as 150,000 doctors in the next 15 years, according to the Association of American Medical Colleges. The greatest demand will be for primary-care physicians. Emergency rooms, the only choice for patients who can't find care elsewhere, may grow even more with longer wait times under the new health law. That might come as a surprise to those who thought getting 32 million more people covered by health insurance would ease ER

Implication of this shift for hospitals is very important because hospitals inpatient have decreased. Hospitals are losing more money due to the growth of ambulatory care facilities. Ambulatory care facilities can affect hospital fiscal health by attracting many profitable services away from the hospitals. Consumers are saving more money because they can get good quality of care for less money and less hospital stay than hospitals. This can impact health care delivery system because they will be more competition between those ambulatory care facilities and hospitals.

Changes to the health care system throughout the United States will greatly influence health care utilization. Trends in health care utilization can be used to project future health care needs, predict expenditures, or for training personnel in new medical procedures and policies (Berstein, Hing, Moss, Allen, Siller & Tiggle, 2003). For example, the increase in ambulatory surgery was changed by improvements in anesthesia and improved techniques in Cardiopulmonary Resuscitation (Berstein, Hing, Moss, Allen, Siller & Tiggle, 2003). Advanced medical procedures that used to require a few weeks of bed rest now only need a few days in the hospital. Shorter hospital stay makes the patient happier and it

The cost of the health care industry has always been rising since the early 1980s. It has been a growing concern in both the industry and society. Massachusetts General Hospital (MGH) is no exception. Even though the average length of stay (LOS) for the patients in MGH has been declining (Exhibit 10), it is still the highest compared to their competitors (Exhibit 6). Besides the cost, there is no uniformity of process and standardization across different facilities and departments of the hospital. MGH lacks communication and coordination between the facilities.

Is cost shifting fair in the name of being “my brothers’ keeper” or is it unacceptable to take from the haves and in turn, giving it to the have-nots. It sounds unfair; however, this is a common trend in the United States healthcare system. According to Cambridge dictionary, cost shifting is “a situation in which the price of one product or service is higher than it should be, in order to pay for losses on another product or service for which the price is too low.” The cost shifting trend affects patients with health insurance by compensating for the financial loss hospitals incur when services are provided to those without insurance.

Healthcare spending growth rate trends show astounding estimates. Since 1960, spending has risen from $27 billion ($143 per capita, 5.1% pf GDP) to amazing $1,678.9 billion ($5,670 per capita, 15.3% of GDP, 2003 data) (HHS, 2005). Recent research estimated that by 2013, healthcare spending will be as high as 18.4% of the Growth Domestic Product. It is important to note that the gradual move from hospital to ambulatory setting has resulted in much higher spending on outpatient hospital services and prescription drugs. The spending growth for these two trends is much higher than the overall healthcare cost growth, which, in fact, increases faster than such important economic indicators as GDP growth, inflation growth, and population growth rates.

The expanded health insurance coverage via the Affordable Care act is having a major effect on managed care hospitals in many avenues. These effects are impacted via the increase in demand for care, the increase of patient revenues, as well as a lower uncompensated care especially for the uninsured. Not surprisingly, the constraints as well as the controls that are being imposed by the managed care have lead to an outrage by the doctors and their patients. Managed care in the United States finds itself under attack from every side. As far as the managed care organizations are concerned, administrators are unease regarding the profitability or the surplus for reinvestment and even the consumers are also worried about the possible closure of hospitals (Goodson, 2010). Managed Care Organizations have been forced to reduce hospital utilization even though there have also been a few facility closures.

Understanding the classification of healthcare services in terms of acute and long term care enable us to plan for services, to describe institutions, and to allocate funding and reimbursement. In the United States, healthcare services provided by health care providers (such as doctors and hospitals) are paid for by the following including, private insurance, Government insurance programs, people themselves (personal, out-of-pocket funds). Additionally, the government directly provides some health care in government hospitals and clinics staffed by government employees. Examples are the Veteran’s Health Administration and the Indian Health Service.

Hospitals and health systems in the U.S. are experiencing a remarkable transformation in their business models directed from numerous influences that are projected to ultimately turn the industry around. Pressures include providers troubled with the quantity of services they are responsible for, to providers who concentrate on presenting high-cost services that give emphasis to sustaining healthy populations (Dunn & Becker, 2013).

Revenue generated from inpatient services is decreasing gradually and it is shifting towards outpatient services and ambulatory surgical services, which are primarily owned by physicians. Hence hospitals are losing their money in this case

For health care centers to remain competitive, it is important for them to conduct comprehensive market analysis of their industry to properly understand important issues affecting their health care marketplaces (CSU-Global, 2015). An effective market analysis consists of the following elements: industry overview, target customers, market segmentation, competition and market needs, growth, and trends (CSU-Global, 2015). Therefore, a good market analysis assists health care centers in gaining a competitive edge by determining what their consumers are looking for in regard to products and services.