The U.S. healthcare system was designed for another time. Nowhere is that more evident than in the size and distribution of our nation’s hospital facilities.
Inpatient volumes have been declining for years as economic pressures create the incentive to treat patients in less expensive settings and as technology increases the types of procedures that can be performed in outpatient settings. Hospital admissions fell 10 percent since 1980 and 5 percent within the most recent decade, with the decline generally twice as great for surgical admissions.
Not surprisingly, this decrease in admissions has caused an increase in the number of empty beds in America’s hospitals. A 2018 study identified 13 states in which average hospital occupancy rates for urban hospitals were 50 to 60 percent, and 28 states in which average occupancy rates for rural hospitals were 40 percent or less.
These averages mask even greater variation from facility to facility within smaller areas. Within Chicago, for example, hospital occupancy rates range from 37 percent to 94 percent.
Low occupancy is a patient care issue and an economic issue.
Low occupancy is a patient care issue. For many years, researchers have linked low hospital and physician volumes with lower-quality outcomes, particularly for surgery and obstetrics, including maternal and perinatal outcomes.
Low occupancy is also an economic issue. With healthcare spending near 18 percent of GDP, and with healthcare the largest and fastest growing percentage of government mandatory spending, the nation cannot afford the costs associated with a system in which so many facilities sit substantially empty. At the same time, with average hospital operating margins at 2.5 percent, health systems cannot afford to operate hospital facilities that are not economically viable.
Healthcare’s hospital chassis was designed for a time when inpatient care was the center of the healthcare delivery system. The need to control costs, improve quality, take advantage of new technology, and improve the patient experience means that the future healthcare chassis will look very different. That chassis will have fewer inpatient beds, more widely dispersed and more types of outpatient settings, a robust telehealth network, and tech-enabled coordination among providers, settings, and consumers.
Hospitals and health systems that are moving toward this future state must face the issue of low-occupancy facilities.
Hospitals and health systems that are moving toward this future state must face the issue of low-occupancy facilities. In many cases, these hospitals can be repurposed in a way that will provide better access, convenience, and quality for communities. However, when those goals cannot be achieved through repurposing, a hospital or hospitals may need to be closed in order for a health system to transfer critical resources to meet fast-changing organizational goals and objectives.
Yet healthcare organizations trying to create this chassis for the future find that closing a hospital is no easy task. Witness the saga of 225-bed Westlake Hospital in Melrose Park, Illinois, a suburb west of Chicago.
Westlake Hospital has a $25 million annual operating deficit and a 55 percent occupancy rate. Another hospital is less than two miles away, and another, owned by the same company that owns Westlake, is four miles away.
On January 29 of this year, Los Angeles-based Pipeline Health acquired three Chicago-area hospitals from Tenet, including Westlake. Two weeks later, Pipeline announced it would close Westlake due to higher-than-anticipated financial losses.
Here is what happened next:
February 18: Community members and politicians staged a protest at the hospital.
March 7: The village of Melrose Park filed a lawsuit against Pipeline to stop the closing.
April 9: A judge granted a temporary restraining order to prevent Westlake from closing until the Illinois Health Facilities and Services Review Board reviews Pipeline’s application.
April 16: A judge found that some services had been closed at Westlake and ordered Pipeline to restore them or face a fine.
April 30: The Illinois Health Facilities and Services Review Board voted unanimously to allow Pipeline to close Westlake.
May 6: Illinois Governor J.B. Pritzker withdrew the two members he had previously nominated to the Review Board, because both of them voted to approve the Westlake closure.
May 7: A judge approved an emergency motion filed by Melrose Park to keep Westlake open while the village appeals the Illinois Review Board decision to allow the hospital to be closed.
At this writing, the saga continues.
Eric Whitaker, M.D.—the physician and public health practitioner who is a principal of Pipeline Health—characterized the Westlake situation this way:
"We cannot ignore the massive changes in healthcare delivery nor the mandate to get better outcomes for our patients."
"[W]e cannot ignore the massive changes in healthcare delivery nor the mandate to get better outcomes for our patients. To maintain Westlake Hospital in its current form is to maintain the past and risk the future of other strong hospitals… We would rather invest in patients, not buildings. The Chicago region, like the healthcare industry, has two choices: Hold on to the past or move to the future where better and more cost-effective care can be provided to everyone."
The saga of Westlake is not an isolated example. Hospital closures throughout the nation have met with resistance from politicians, union leaders, church leaders, and community groups.
This response is understandable. No community wants to lose its hospital, even when another hospital is available nearby. Hospitals and communities have strong and important relationships, often with many decades of history. The deeply personal nature of health and healthcare makes any change disconcerting. No one wants to risk a reduction in services to vulnerable populations.
As the examples of Westlake and elsewhere show, closing or repurposing a hospital is the last thing that many healthcare executives would want to take on. It can create a rift with the community. It can be a protracted and frustrating process. And it can draw a significant amount of time and other resources away from other essential initiatives.
Despite much pain and protest, the essential hospital facility structure of American healthcare will change. Market economics make it inevitable. Technology makes it inevitable. And the need for more effective care makes it inevitable. The question is whether we as a nation will make this process of change slow, painful, and poorly executed, or whether we can use our energy to make this change positive, future-focused, and successful.
Where is America going with healthcare? As Dr. Eric Whitaker asks, are we going forward or are we going backward?
As a society, we must decide. The longer we cling to the past, the more difficult the transition to the future will be.
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