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Prepared to Care:
Who Supports the 24/7 Role of America’s Full-service
Hospitals?
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The standby role of full-service is both unique and critical in the health care system.
Standby Role:• Provide access to care 24 hours a day 7 days a
week (24/7)• Care for all patients regardless of ability to pay• Be ready to respond to disasters
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24/7 Role of Full-service Hospitals
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Americans rely heavily on the 24/7 access to care provided by hospital EDs…
• One third of hospital care begins in the emergency department.
• The majority of ED patients require immediate care.
• More than half of ED care occurs outside of normal business hours.
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
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…and that need is growing.
Source: AHA Annual Survey, data for community hospitals.
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
92.8 94.899.5 103.1 106.0 110.0 111.0 112.6
0
20
40
60
80
100
120
1997 1998 1999 2000 2001 2002 2003 2004
Em
erg
ency
D
epar
tmen
t V
isit
s
Emergency Department Visits, 1997 – 2004, In Millions
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Meeting common emergency needs requires a wide array of resources be maintained 24/7.Example: Resource Needs for a Common Condition
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
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Safety Net Role
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Hospitals provide a medical safety net for the growing number of uninsured…
Number of Uninsured, 2000 – 2004, In Millions
39.8
45.0 45.843.6
41.2
2000 2001 2002 2003 2004
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
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…serving proportionally more Medicaid and uninsured patients than physician offices…
Percent of Total Visits by Expected Source of Payment, Emergency Departments vs. Physician Offices, 2003
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
21%
14%16%
36%
5%
23%
56%
10%
Medicaid Uninsured Medicare Private Insurance
Emergency Department Physician Offices
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…and taking an increasing role in the care of the behaviorally ill.
1,5071,349
467
662
1995 2004
Units of Hospitals Freestanding Facilities
Behavioral Health-Related Emergency Department Visits, 1994/95 – 2001/02
In Millions
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
Inpatient Psychiatric Facilities, 1995 – 2004
4.4
2.8
1994-95 2000-01
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Disaster Readiness
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A wide range of disasters hit communities annually…
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
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...and hospitals stand ready to respond.
Percent of Hospitals with Response Plans by Type of Incident, 2003
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
97.3%
84.8%
77.2% 76.9%
85.5%
NaturalDisasters
Chemical Biological Nuclear orRadiologic
Explosive
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How is this Role Supported?
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PrivatePayers
ElectiveCases
LessComplex
SurgicalCases
Well-funded
IndigentCare
24/7 CapacityUnfunded
Revenue from Service to Paying Patients
Medicareand
Medicaid
EmergentCases
MoreComplex
MedicalCases
Under-funded
DisasterReadiness
Hospitals support the standby role through revenues from patient care.
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But hospitals face rising levels of uncompensated care…
$18.5
$20.7$21.6 $21.5
$22.3
$24.9
$26.9
$19.0
1997 1998 1999 2000 2001 2002 2003 2004
Total Uncompensated Care Costs (in $ billions),1998 - 2004
Source: AHA Annual Survey
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…and a growing shortfall in payment from Medicare and Medicaid.
Hospital Payment Shortfall Relative to CostsFor Medicare and Medicaid Patients in Billions, 1997-2004
1997 1998 1999 2000 2001 2002 2003
Medicare
Medicaid
Bil
lio
ns
of
Do
lla
rs
2004
Source: The Chartis Group, Prepared to Care: The 24/7 Role of America’s Full-service Hospitals, 2006
-1.9-2.6 -2.1
-2.3
-5.0
-15
-8.1
-3.4-2.4-1.4
4.32.3
-7.1
-1.6 -1.4
-$30
-$20
-$10
$0
$10
Total Shortfallin 2004: $22 Billion
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Medicare and Medicaid account for over half of the care provided by hospitals.
Percent of Gross Revenues by Payer, 2004
Source: The Lewin Group Analysis of American Hospital Association Annual Survey data, 2004 data for community hospitals
Private Pay
43.0%
Other1.7%
Medicare40.7%
Medicaid14.6%
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When some payers don’t pay their fair share, others must pick up the difference.
Cost Shifting “Hydraulic"
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
Cost
10 80 907060504030200 100
Below Cost PayersAbove Cost Payers
Pay
men
t to
Co
st R
atio
Percentage of Provider Costs
Cost Shift (A)= Shortfall (B) + Margin Contribution (C)
Margin
Cost Shift
Shortfall
C
A
B
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Thus private payers are taking an increasing role in supporting hospital costs.
75%
100%
125%
150%
80 82 84 86 88 90 92 94 96 98 00 02 04
Aggregate Hospital Payment-to-cost Ratiosfor Private Payers, Medicare, and Medicaid1980 - 2004
Source: The Lewin Group analysis of American Hospital Association Annual Survey data, 1980 - 2004 for community hospitals
Private Payer
Medicare
Medicaid
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Conclusion
• America’s communities depend heavily on the standby role of full-service hospitals and that need is growing.
• Despite its importance, this role is not explicitly funded.
• Hospitals fund the standby role through revenues from patient care.
• But levels of uncompensated care are rising and the Medicare and Medicaid shortfall is growing.
• Thus, hospitals increasingly depend on the private sector to subsidize this role.
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Conclusion (continued)
• The level of “cost-shifting” is increasing.• Government under-funding is a serious issue for
businesses that provide health insurance.• “Cost-shifting” drives up the cost of private health
insurance.
• Higher costs make it harder for employers to maintain coverage.
• Hospitals need the support of the business community in securing adequate funding for government programs.