This article was originally published in Forbes
An “antechamber to the tomb” is how George Orwell described hospitals in his 1946 essay “How the Poor Die.” It reflected that patients went there to lie in a bed with little prospect of successful treatment. Thankfully, modern medicine has drastically improved outcomes. What’s more, hospital beds will hardly exist in the future, according to Eric Topol, Director of the Scripps Research Institute, in an interview with Chris McCann, CEO of Current Health. Why? A combination of changes in medical practice, advances in technology and changes to reimbursement mean treatment is poised to shift from the hospital bed to the patient’s own home. This new care model gives industry players exciting opportunities to expand their services, improve patient experiences and outcomes and increase revenue.
That said, it’s no small feat to reconfigure services, and a paradigm shift in care delivery requires speed of execution to remain relevant. As emerging tech companies move from being new entrants to mainstay organizations in the healthcare space, there’s a risk of traditional healthcare providers being outcompeted by more nimble competitors. Either hospital leaders will own this transition or other players will spring up. For traditional healthcare providers to thrive, they need to begin planning and building out their technology stacks.
Between 1975 and the mid-2000s, the total number of U.S. hospital beds decreased by more than one-third, from a peak of 1.5 million. The number has stayed between 900,000 and 950,000 ever since. The initial decrease was driven by advances in medical practice that shifted the emphasis from convalescence — bed rest after a heart attack — to intervention and discharge — coronary artery stents to treat a heart attack.
The Covid-19 pandemic has now triggered a change that is likely to reduce the number of hospital beds once more. The Centers for Medicare and Medicaid Services (CMS) introduced a waiver in November 2020 to allow hospitals to bill the same amount for acute medical care delivered in the patient’s home as they do for care delivered in their physical facilities, creating ease and incentive for treatment in the bedroom rather than in the hospital. The aim is to preserve hospital capacity during the pandemic, but the longer-term consequences — should it become permanent — will be far-reaching for providers and patients. In the short term, inpatient bed numbers will likely remain stable and hospital at home will increase. In the longer term, an aging population — 20% of Americans are expected to be over 65 by 2030 — will likely anticipate treatment at home.
CMS has presented providers with an additional revenue stream. Traditionally revenue has been directly related to the number of “heads in beds,” which is limited by hospital capacity and speed of turnover. Now, with a hospital at home, capacity is no longer a constraining factor. Theoretically, these new patients should drive more value because they don’t require the fixed costs associated with a brick-and-mortar hospital; plus, they experience better outcomes.
A study at Brigham Health identified a 38% reduction in the cost of an acute care episode for study participants, lower readmission rates and less sedentary patients when treated at home. Hospital at home has a clear ROI model for hospitals since they can clearly identify which patients were triaged for care at home rather than admitted. Additionally, geography becomes less of a constraining factor, and the addressable market increases if the patient doesn’t need to come to the hospital, a trend we have seen with telemedicine in general. Finally, it’s an opportunity to improve the patient experience for those who generally dislike admission to a noisy and unfamiliar hospital. So far, so good for the patient and the hospital CFO.
The challenge lies in hospitals’ ability to re-configure high-quality services. In any paradigm shift, speed is of the essence. Most health systems don’t currently have the infrastructure to provide hospital at home — daily visits, remote monitoring, blood tests, physiotherapy. If they’re slow to create this new offering, then the competition, either faster-moving hospitals or new challengers, will challenge their market share. Deloitte research shows 52% of health system revenue comes from inpatient care. Much of this will be up for grabs. New tech-enabled challengers have lower start-up costs considering they don’t need to run a physical hospital and will aim to contract with health insurers or employers directly. For example, we’ve already seen this with Amazon Care.
We’re seeing a suite of companies maturing that enable health systems to build out their technology stacks and deliver in-home models of care, like Workpath for blood tests, Eko for remote auscultation and Scriptdrop for prescriptions. Existing capability differs wildly — some providers already offer home visits, home physio, home phlebotomy and prescription delivery. Successful health systems will likely select best-of-breed solutions to complement their existing services or build out a new stack from scratch. Many will seek one vendor that can pull all these services together and act as the “mission control” for enrolling, monitoring and managing patients remotely.
Incumbents have significant advantages such as existing payer and patient relationships, deep experience delivering care and the ability to escalate and de-escalate patients from the emergency department. The Defense Health Agency has already begun its hospital at home program with positive results. It triages patients at its emergency departments across the U.S., uses continuous remote monitoring technology to monitor patients at home and coordinates care from its Virtual Medical Center in Texas. Brick-and-mortar facilities will always be needed for imaging, emergency care, surgery and intensive care. In the medium-term, providers likely will move to a hub-and-spoke model with centralized, large facilities offering high-intensity care, smaller facilities closer to the patient (e.g., urgent care centers, imaging centers) for acute triage and virtual medical centers to monitor and treat patients at home.
In the longer term, patients and their insurers will likely seek providers that offer high-quality services at home. The emphasis will be on preventing admissions rather than preventing readmissions. Health systems that continue to focus on inpatient care only will end up managing increasingly empty hospital wards. Orwell’s antechamber will have gone.