Hospital mergers and acquisitions continue to increase at a rapid rate with precedent-setting deals occurring in 2018. Given that this a primary business strategy for a majority of healthcare organizations, this trend is expected to continue into 2019 and beyond. One of the many challenges that newly merged healthcare systems face is eliminating redundant services and surplus capacity. Realigning services and reallocating resources among multiple campuses requires a unique strategic, operations improvement, and facility planning process. The planning team needs to understand the market and patient population, look at alternate ways of allocating resources, and evaluate the impact on operational costs, before recommending investments in bricks and mortar. This article looks at opportunities for improving efficiency and eliminating surplus capacity, separating major issues from less important issues, and other key considerations.
Fluctuating Demand for Hospital Beds
Starting in the 1980s, healthcare strategists and policy experts encouraged hospitals to reduce their surplus inpatient bed capacity in response to declining admissions, use rates, and lengths of stay — as a result of the advent of Medicare’s diagnosis related groups (DRG) payment methodology in the public sector and managed care in the private sector. Hospitals responded to changes in demand by shifting their resources. Between 1980 and 2003, community hospitals in the United States took 175,000 inpatient beds out of service — an 18 percent reduction — through downsizings, consolidations, and closures. At the same time, skilled nursing and subacute care facilities were developed to provide a less expensive and less resource-intensive alternative for patients requiring a lengthy recuperation. Home health agencies also proliferated. Since 2003, the number of hospital beds has declined less dramatically — a reduction of another 12,700 beds. Although, nationally, inpatient admissions rose from 1992 to 2012, both the rate of inpatient admissions per 1,000 population and the average length of stay have declined to an all time low — resulting in an overall decline in the demand for inpatient beds.