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Jul 2015

The Rise of the Fall of the U.S. Hospital

One of the largest fall-outs of the Affordable Care Act, aka Obamacare, is the increased pace of hospitals closing today and in the near future. Health insurance plans with increasingly higher deductibles are causing people to skip preventative check-ups because of the extra cost. Fewer hospital visits means far less revenue. Add in the declining revenue being paid by the federal and state governments and the recipe for disaster is clear for medical facilities with paper-thin profit margins.

Many hospitals across the country are reaching a critical crossroad. The median age of U.S. hospital buildings is rising, a big factor in California where state law mandates hospital buildings meet new seismic retrofitting standards. In addition, new hospital construction has dropped sharply, with capital going toward ambulatory-care facilities, physician hiring, information technology and the telehealth business. Mobile-health apps for mobile devices are becoming more prevalent with continued growth expected in the next few years as hospitals, patients and insurers look for new ways to improve care and reduce costs.

Hospital executives say patients with high-deductible insurance policies, which now represent roughly 20 percent of all employer-provided health plans, are encouraged to seek care in lower-cost settings to hold down medical bills. That choice is adding to an already-growing demand for ambulatory care.

For academic medical centers, the high cost of their education, research and specialty services makes them less competitive as their bed-occupancy rates fall, say healthcare experts. Many major academic medical centers are acquiring community hospitals to handle less-complex patients in lower-cost settings while reserving beds in the academic hospital building for only the sickest patients and those requiring the most complicated care.

48 rural hospitals have closed since 2010 and 283 are in danger of shutting their doors, according to the National Rural Health Association. Most of the shuttered hospitals are in the South, but California hospital closures are expected to rise as retrofitting deadlines near.

A recent study showed that hospital closures did not greatly change death rates.

Researchers at the Harvard School of Public Health examined 195 hospital closures between 2003 and 2011, looking at health experiences in the year before and the year after the hospital closed its doors. The Harvard School paper, published in the journal Health Affairs, stated that changes in death rates of people on Medicare — both those who had been in the hospital and among the broader population — were no different than those for people in similar places where no hospital had closed.

Are there solutions? Hospitals with fewer staffed beds are looking for new ways to generate revenue from their excess physical space, including signing leases with hospice providers or even hotel operators, said Mark Grube, a managing director with Kaufman Hall. But there are limits to how far a hospital can take that strategy. Perhaps hospitals will take on the look of the modern U.S. airport, where many terminals have taken on a mall-like appearance with brand-name stores and restaurants.

According to the American Hospital Association, in 2011 approximately 5,754 registered hospitals existed in the U.S., housing 942,000 hospital beds along with 36,915,331 admissions. More than 1 in 10 Americans were admitted to a hospital in 2011.

Hospitals in rural communities make a substantial imprint on local economies. In many of those communities, the local hospital represents one of the largest employers and economic drivers in the area. Of the total annual American health care dollars spent, hospitals are responsible for more than $750 billion.

Many experts predict the change will be swift and that by 2020, one in three hospitals in the United States will close or reorganize into an entirely different type of health care service provider, with many independent hospitals having been swallowed up by major health systems..

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