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Moody’s: Integrated Planning Essential for Financial Viability

Evolving industry pressures will require hospitals/systems to focus on their business strategies and prudent allocation of limited capital and financial resources.  Financial viability and competitiveness will require expanded patient access, digital efficiencies, top talent and financial flexibility.


Moody’s Investors Service analyzed each of the above components in its recent Sector-in-Depth, Flexibility, integrated planning key to the healthcare system of the future. We present a partial summary of its report today and will continue with the remaining components next week.


Balancing investments in access points with maintaining high-margin inpatient services


Outpatient facilities will continue to be an efficient and cost-effective way of treating lower severity cases and of expanding into underserved areas; however, margins are generally weaker than for inpatient services. Moody’s anticipates that traditional bed space will be reserved for scheduled cases of mainly higher acuity and surgical patients. Most medical cases, particularly unplanned, will be cared for as outpatients in ambulatory or micro-hospital settings. This evolution will eventually lead to hospitals, especially academic or more advanced tertiary facilities, becoming large intensive care units.


Some key points in the inpatient/outpatient discussion include:


  • Outpatient visits tend to be reimbursed at lower rates than inpatient stays.
  • Outpatient sites generally require less capital investment and have lower overheads than inpatient facilities, allowing them to be operated profitably.
  • Hospitals that are disproportionately dependent on lower acuity inpatient admissions will be at a disadvantage with the shift toward greater outpatient care. (However, Moody’s noted its data show hospitals with greater dependency on inpatient admissions generally have higher margins.)
  • The number of available inpatient beds will not remain aligned with overall population growth as hospitals shift lower acuity cases to outpatient settings.
  • Capital investment in traditional inpatient facilities will be increasingly targeted towards higher acuity, more intensive cases that cannot be treated in an outpatient setting.
  • Moody’s analysts expect growing investment in intensive care units and larger operating rooms to accommodate newer technologies such as surgical robots.
  • Consumerism and changing standards of care will continue to drive the shift to single-occupancy rooms, sometimes reducing overall bed count as double-occupancy rooms are converted.


The analysts also pointed to the acceleration of joint ventures with physicians and non-acute care providers and disruptive strategies by health insurers—for example, acquiring and integrating with physician groups and outpatient service providers—as increased direct competition with hospitals, putting further pressure on volumes and margins.




The Volume to Value Paradox advanced Quality course, featuring Nate Kaufman, Marian Jennings and Dan Grauman, will be in your library later this week. These experts discuss their perspectives of moving from volume to value, the pitfalls to avoid, how to involve physicians, the impact of consolidation and scale on value and the overall challenges of inserting value into the reimbursement formula.



For a complete list of iProtean, now part of Veralon courses, click here.



For more information about iProtean, now part of Veralon, click here.