Hospitals are the most expensive place to get medical care in the health care industry. Hospitals consume nearly one-third of health care expenditures, accounting for more than $1.33 trillion a year. I often advise people to never get anything done at a hospital if they are physically able to go anywhere else. For example, my wife unknowingly started to make an appointment for an outpatient CT scan at a nearby hospital. I wrote about her experience:
As luck would have it, prior authorization is all that saved us from a huge bill, of which her share was going to be $2,700. I quickly found a free-standing radiology clinic that had a contract with Blue Cross Blue Shield (BCBS) of Texas for $403.
Hospitals are places to avoid unless there are no other options.
Based on a survey of physicians who serve predominantly Medicare fee-for-service (FFS) and Medicare Advantage (MA) patients, we estimate that up to $265 billion worth of care services (representing up to 25 percent of the total cost of care) for Medicare FFS and MA beneficiaries could shift from traditional facilities to the home by 2025 without a reduction in quality or access. That number represents a three- to fourfold increase in the cost of care being delivered at home today for this population, although how the shift will affect reimbursement rates is not yet clear.
This is all care that would otherwise be provided in a hospital, and still may require inpatient hospital care unless efforts are made to shift more care to the home. Hospital care in the home is not new, it dates back 30 years but has never been widespread. I reported on it in A Hospital Stay (but in Your Own Home), saying:
With the advent of the digital age, it became easier to remote monitor and care for patients in their own homes. I’d love to see competing virtual hospitals spring up that don’t need big buildings and can contract to perform hospital-at-home for less than a stay in an actual hospital bed.
What currently happens is called the continuum of care, when patients are too sick to go home after a hospital stay. Hospitalized patients not well enough to go home are transferred to a skilled nursing facility once they are stable. After a few days in skilled nursing they may be transferred to a nursing home to convalesce. Finally, they will be transferred from a nursing home to home with home care until they are well enough to care for themselves.
The reason patients are transferred along the continuum of care is because of reimbursement. Hospitals are not reimbursed by Medicare for unlimited stays. Thus, hospitals have an incentive to transfer seniors to lower-cost settings. There is also a limit to how many days of nursing home care Medicare will reimburse so it makes sense to shift care to the home when appropriate.
Hospital care in the home will never occur without an incentive for hospitals to do so. In A Hospital Stay (but in Your Own Home) I wrote:
What if Medicare was willing to care for patients in their own homes? The average cost of a stay in the hospital per day is $13,600. Of course, it tends to be higher on the first few days than the last few. We’ve already talked about being discharged home with home care, but what if patients could be discharged home with hospital care? That’s a program that is being done in Boston and across the country.
How would hospital care in the home work? There would have to be remote monitoring and someone coming into the home to feed, bathe and provide care the patient can’t provide themselves. A nurse or a home health aide would visit periodically to check up on the patient. Durable medical equipment would be supplied and used to monitor and care for the patient. Depending on how it’s done this could be either cheaper or more expensive than caring for a patient in a hospital.
Everything spent in our $4 trillion a year health care system must be ordered by a physician. As always, Doctors would oversee care. According to McKinsey:
Care at Home cannot succeed without physician buy-in. To understand the percentage of care being delivered in an office or facility today that could be provided at home—in clinically appropriate and cost-effective ways—for different service categories by 2025, we conducted a survey of physicians who serve predominantly Medicare FFS and MA patients.
If the goal is to create competition for hospitals by encouraging the growth Virtual Hospitals, it may require physicians who work independently of hospitals. The problem is that hospitals have been acquiring physician practices lately. More than half of physicians (52%) are employed by hospitals. The answer may be independent physician groups who contract with Medicare Advantage (MA) plans.
The last major change in Medicare, designed to motivate hospitals to deliver more efficient care, was the prospective payment system in 1983. It may require something similar to divert more care from hospitals into patients’ homes.