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Dr. Pate’s Prescription for Change

St. Luke’s Health System’s Journey to Transform Health Care

St. Luke’s Dr. David Pate on the Future of Hospitals

By Dr. David C. Pate, News and Community
June 5, 2018

Are hospitals becoming obsolete?

That was the question posed in – and provocative title to – an op-ed piece in The New York Times earlier this year by Dr. Ezekiel J. Emanuel.

My answer to that question is no, but there will continue to be a reduction in the number of hospitals in some areas of the country – particularly those in rural areas and those in over-bedded metropolitan areas – and a migration of lower-acuity services out of hospitals into lower-cost settings, including patients’ homes.

I agree with Dr. Emanuel’s conclusion that “many of today’s hospitals will downsize, merge or close … Those that remain will be devoted to emergency rooms, high-tech services for premature babies, patients requiring brain surgery and organ transplants, and the like.”

I would add a long list of additional services that hospitals will continue to provide, including high-risk deliveries, surgical procedures on high-risk patients and treatment for heart attacks, strokes, arrhythmias, trauma, sepsis, respiratory failure, kidney failure, advanced heart failure and many other complicated illnesses that require the collaboration of many specialists.

For these reasons, I cringed when I read what Dr. David Feinberg, president and chief executive officer of Geisinger Health System, told the Wall Street Journal: “I think my job ultimately is to close every one of our hospitals.”

I am certain that this was hyperbole. During this time of great change that our country is going through in transforming health care, it isn’t productive to further scare the people we depend on to make the transformative change with the fear that they will all lose their jobs.

At the same time, high-profile potential mergers announced recently – e.g., the CVS acquisition of Aetna and Walmart’s acquisition of Humana – have amplified concern that there are efforts afoot to disintermediate hospitals.

I see the advantage that integrated delivery systems have to manage the risk for the entire continuum of care and to ensure that patients get the best care in the most appropriate setting that will provide the best outcomes at the lowest total cost of care.

Integrated delivery systems can make sure that their hospitals excel in outcomes for the conditions I mentioned above that will remain in hospitals, while making the shift of lower-acuity care to other, more cost-effective settings, rightsizing the services of hospitals and focusing hospital care on an increasingly sicker, more complex and riskier population of patients.

In all of this, there is an interesting development to note – the emergence of “micro-hospitals.”

There is a wide range of variation among micro-hospitals, but in general, these are 30,000- to 60,000-square-foot facilities with eight to 15 beds, an emergency room and perhaps some physician offices.

I understand the reasons some health systems are investing in these facilities – low capital costs compared with regular hospitals, structured in a for-profit venture that bypasses the consideration of charity care, built in more affluent communities where the payer mix is more desirable, with the latitude to charge hospital prices for low-acuity care – but they seem decidedly out of step with what most futurists are predicting, a movement away from fee for service to pay for value and the provision of services that we are already seeing moving out of hospitals into lower-cost urgent-care centers.

Craig Goguen, chief executive officer of Emerus Holdings Inc., a company that joint ventures micro-hospitals with health systems, was quoted in The Wall Street Journal’s Feb. 25 article, “What the Hospitals of the Future Look Like,” saying, “Typically, 92 percent of patients who come to the micro-hospitals are treated and sent home in an average of 90 minutes, and 8 percent are admitted overnight for care such as intravenous medication administration.” That is very different from the kind of patients that traditional hospitals care for.

My view is that hospitals are not becoming obsolete, but they are and will continue to decrease in number and shift to the provision of higher-complexity services for higher-risk patients, while micro-hospitals are a short-play, fee-for-service strategy that will not survive the transition to pay for value – at  least, not as hospitals.

About The Author

David C. Pate, M.D., J.D., previously served as president and CEO of St. Luke's Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009 and retired in 2020. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.