Impact of US Recession on Hospitals

THE IMPACT OF THE U.S. RECESSION ON HOSPITALS 32% OF AN AVERAGE HOSPITAL'S HOWEVER, THOSE HISTORICALLY STABLE ...WHICH WAS DRIVEN BY BOTH A LOSS OF COVERAGE AND A DROP IN UTILIZATION³ INPATIENT MARGIN COMES FROM ADMISSIONS DECLINED DURING THE SCHEDULED ADMISSIONS FOR THE RECESSION... COMMERCIALLY INSURED1 NUMBER OF SCHEDULED INPATIENT ADMISSIONS PERCENT ANNUAL GROWTH RATE OF ROOT PERCENT OF TOTAL HOSPITAL PATIENT IN MILLIONS² CAUSES OF HOSPITALIZATION DECLINE, MARGIN BY PAYOR AND ENTRY POINT, 2008 - 2011 2008 0.4% -4.5% PER YEAR PER YEAR COVERAGE LOSS 10- -1.7% OTHER MEDICARE / SCHEDULED 32% MEDICARE / ED UTILIZATION COMMERCIAL & SCHEDULED DROP -2.8% COMMERCIAL / ED --4.5% -5 RECESSION THIS DECREASE IN SCHEDULED INPATIENT ADMISSIONS FOR COMMERCIALLY INSURED PATIENTS RESULTED IN A LOSS OF $3.7MM FOR THE AVERAGE 300-BED HOSPITAL DURING THE RECESSION (2009, 2010, 2011) SOURCES: • Objective Health de-identified client data • Premier discharge database • AHRQ's National Inpatient Sample (NIS) • US Census 2010 • Objective Health analysis FOOTNOTES: OBJECTIVEHEALTH" 1. Margin = contribution margin, defined as net revenue minus variable cost. "Scheduled" defined as all admissions, including transfers and births, that are not through the Emergency Department. A cohort of 16 hospitals was analyzed to understand the contribution margin mix across various payors and scheduled vs. unscheduled admissions. 2. During the recession, historically stable commercial ED volume remained flat due to a slight increase in utilization. 3. Decline may be attributed to a variety of factors unrelated to recession. 4. Average 300-bed hospital with $90 million A MCKINSEY• SOLUTION FOR HEALTHCARE PROVIDERS Copyright 2012, Objective Health, a McKinsey Solution for Healthcare Providers. annual contribution NUMBER OF ADMISSIONS IN MILLIONS PERCENT ANNUAL GROWTH