Hospital numbers game leads to partial closures

Yes, hospitals are closing around the country, but even more often, hospitals shut down specific services, especially relatively unprofitable ones like maternity care and behavioral health care.

• This leads to what gets referred to as "care deserts," which we covered earlier this week.

Why it matters: Closures may not be all bad, but most of them ultimately make it harder for patients to access care — and some patients are more likely than others to be impacted.

Where it stands: Many experts will tell you that all hospitals can't be all things to all people amid the U.S.'s demographic changes and care advancements, and some argue the closure of some hospitals or services actually has some positive outcomes in terms of efficiencies or quality.

• But a big problem is that hospitals are responding to the financial incentives created by both government and private insurers, and those incentives aren't always aligned with what society writ large wants from a hospital.
• They're also stacked against providing care to certain patients, especially poor ones.

"Think of hospitals not as a charity, but as a business. Imagine anyone running a business. You have options, multiple products; you want to prioritize the products that bring you the highest margin, and you want to get rid of the products that bring loss," said Johns Hopkins professor Ge Bai.

• "I think the business objectives are not aligned with the societal objectives," she added.

The big picture: The issue of specific unit closures is particularly acute within rural settings, although service line closures happen across all hospital types.

• "What it comes down to is really a numbers game. Rural hospitals and the patients they are serving have the decks stacked against them," said Char MacDonald, EVP of public affairs at the Federation of American Hospitals.

The most impacted units include, experts say, labor and delivery/maternity care, psychiatric departments, substance use disorder treatments, pediatric, and — counterintuitively — emergency departments.

• "I think if you ask somebody what a hospital is that doesn't deliver babies or doesn't have an emergency department, then many people would say that's not a full hospital," said Christopher Whaley, a professor at Brown University.

Between the lines: Different kinds of care are reimbursed at different rates by different payers, and that makes providing some care to some patients more lucrative than others.

• Commercial insurance pays more than Medicaid, and imaging centers, for example, generally generate much higher profits than psychiatric departments, which aren't well reimbursed even by private payers.
• Some hospitals also blame private plans' unwillingness to pay for the full cost of services and procedures and Medicare Advantage prior authorization policies.

And some services are low-margin because of the populations they tend to attract: For example, about four in 10 U.S. births are covered by Medicaid, and more than half of U.S. children are insured by Medicaid and the Children's Health Insurance Program.

• Lo and behold, obstetrics, pediatrics, and psychiatric care are services that tend to get cut.
• "If you're trying to improve profitability, what you really want to do is reduce Medicaid patient volume," Whaley said.

The intrigue: Hospitals are required to care for any patient that comes into an emergency room — a rule directly related to the closure of EDs, some experts told me.

• "If you don't have an emergency department, you don't have those same obligations to treat Medicaid patients," Whaley said. But "women with Medicaid need to deliver their babies, and children with Medicaid need pediatric care, and by these sort of selective closures, we're imposing pretty substantial gaps in care among vulnerable patient populations."
• "It's all about balancing. You've got services that are high margin and services that are low margin … emergency rooms are very expensive to keep open and we underpay for emergency services," MacDonald said.

Yes, but: Hospital unit closures don't necessarily cut off access completely, especially in a world where more and more care is moving to outpatient settings.

• Patients still have alternate sites of care in many cases, experts said.