Research Spotlight: Care Delivery Models & Profitability
Our final Research Spotlight post of the year shines on work led by our own Brad Beauvais, published in the most recent issue of Journal of Health Care Finance. Along with colleagues Jason Richter and Lawrence Fulton, Dr. Beauvais and his team set out to assess the impact of recently proliferated care delivery models - including patient-centered medical homes (PCMHs), accountable care organizations (ACOs), and increased utilization of hospitalists - on four profitability measures across hospitals.
Examining hospital-level data from over 2,000 hospitals in the American Hospital Association's 2014 survey dataset, Beauvais and his colleagues (2016) found that PCMH development was positively associated with improvements across all four hospital profitability measures (operating margin, net patient revenue, net income, and return on assets), while hospitalist utilization was positively associated with improved operating margin and net patient revenue. In contrast, hospitals' engagement in ACOs was not found to be associated with any of the four profitability measures, either negatively or positively.
In considering the findings of their study, Beauvais and colleagues (2016) suggest that hospitals' adoption of PCMH models "is most consistently aligned with measures of hospital profitability," leading them to conclude that PCMHs "are an increasingly valuable modality for health care that helps maintain continuity of care and improves integrated medicine on an outpatient basis," allowing hospitals to find gains in cost savings and operational efficiencies (p. 100). Similarly, the authors point to the value hospitals may find in hospitalist utilization, helping to "align resources to improve patient care, more quickly respond to patient needs, and possibly reduce patient safety concerns, readmissions, and ultimately costs," thereby contributing to "financial enhancement efforts" (Beauvais et al., 2016, p. 100). Interestingly, different explanations are proposed in regards to the lack of association between ACO models and hospital profitability, including the suggestion that the significant resources and information system costs required to effectively establish ACOs may impact profitability levels, as well as the acknowledgment that "the financial benefits of the ACO model of care delivery are not yet mature enough to be fully captured in financial reports" (Beauvais et al., 2016, p. 100).
There can be no doubt that hospitals and health care organizations face a variety of conflicting - and at times even paradoxical - challenges and pressures. For example, the era of corporatization in health care has led to institutional logics that align with pressures to maintain financial viability, achieve corporate efficiency, and continually pursue competitive advantage. At the same time, the pressures surrounding recently promoted policy approaches such as value-based care and population health management have focused attention on increased quality, coordination, and clinical effectiveness. Beauvais and his colleagues provide an important contribution to this conversation, asking questions that directly get at the heart of where these two pressures intersect, and offering findings that suggest hospitals can indeed pursue effective "win-win" strategies, maintaining financial viability while meaningfully improving the delivery and coordination of patient care.
Reference:
Beauvais, B., Richter, J., & Fulton, L. (2016). Moving the needle: Evaluating the impact of new care delivery models on hospital profitability. Journal of Health Care Finance, 43 (2), 92-103.
Examining hospital-level data from over 2,000 hospitals in the American Hospital Association's 2014 survey dataset, Beauvais and his colleagues (2016) found that PCMH development was positively associated with improvements across all four hospital profitability measures (operating margin, net patient revenue, net income, and return on assets), while hospitalist utilization was positively associated with improved operating margin and net patient revenue. In contrast, hospitals' engagement in ACOs was not found to be associated with any of the four profitability measures, either negatively or positively.
In considering the findings of their study, Beauvais and colleagues (2016) suggest that hospitals' adoption of PCMH models "is most consistently aligned with measures of hospital profitability," leading them to conclude that PCMHs "are an increasingly valuable modality for health care that helps maintain continuity of care and improves integrated medicine on an outpatient basis," allowing hospitals to find gains in cost savings and operational efficiencies (p. 100). Similarly, the authors point to the value hospitals may find in hospitalist utilization, helping to "align resources to improve patient care, more quickly respond to patient needs, and possibly reduce patient safety concerns, readmissions, and ultimately costs," thereby contributing to "financial enhancement efforts" (Beauvais et al., 2016, p. 100). Interestingly, different explanations are proposed in regards to the lack of association between ACO models and hospital profitability, including the suggestion that the significant resources and information system costs required to effectively establish ACOs may impact profitability levels, as well as the acknowledgment that "the financial benefits of the ACO model of care delivery are not yet mature enough to be fully captured in financial reports" (Beauvais et al., 2016, p. 100).
There can be no doubt that hospitals and health care organizations face a variety of conflicting - and at times even paradoxical - challenges and pressures. For example, the era of corporatization in health care has led to institutional logics that align with pressures to maintain financial viability, achieve corporate efficiency, and continually pursue competitive advantage. At the same time, the pressures surrounding recently promoted policy approaches such as value-based care and population health management have focused attention on increased quality, coordination, and clinical effectiveness. Beauvais and his colleagues provide an important contribution to this conversation, asking questions that directly get at the heart of where these two pressures intersect, and offering findings that suggest hospitals can indeed pursue effective "win-win" strategies, maintaining financial viability while meaningfully improving the delivery and coordination of patient care.
Reference:
Beauvais, B., Richter, J., & Fulton, L. (2016). Moving the needle: Evaluating the impact of new care delivery models on hospital profitability. Journal of Health Care Finance, 43 (2), 92-103.
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