December 18, 2012

Empty beds may signal too many hospitals

A low occupancy rate in some of Maine's acute care centers raises questions about their roles.

By Jessica Hall
Staff Writer

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"It's pretty expensive to keep beds open," said Eugene Litvak, president and chief executive of the Institute for Healthcare Optimization in Massachusetts, a nonprofit organization focused on decreasing the cost of health care and improving its quality.

According to Litvak, who is also an adjunct professor at the Harvard School of Public Health, Parkview Adventist's 24.6 percent occupancy rate "is a huge, huge waste. You'd have to either fill up the hospital more or downsize."

Above: Occupancy rates in Maine hospitals. Dot sizes are proportional to each hospital's number of beds. Blue dots are hospitals with high occupancy rates; red dots are hospitals with lower occupancy rates.

Among the Maine hospitals that responded to questions about its occupancy rates, Parkview has the second-lowest occupancy rate, according to a review by the Portland Press Herald/Maine Sunday Telegram. Several hospitals did not respond to requests for data.

The only hospital polled with a lower rate of occupancy is Charles A. Dean Memorial Hospital in Greenville, one of 16 hospitals in Maine in the Critical Access Hospital (CAH) Program.

That designation means the hospital receives special cost-based reimbursement from Medicare, which is extended to small, rural hospitals to help them financially and reduce hospital closures.

Parkview Adventist's President and Chief Executive Randee Reynolds said the hospital hopes to benefit from Central Maine's administrative services, technology and research to help reduce its costs.

Reynolds said that while Parkview Adventist may need to better market its services to fill more beds, he stressed that hospitals make more money on surgeries and diagnostics tests than filling hospital beds.

"We have to go out in the community and market our services a little better. Sometimes we don't tell our stories very well," Reynolds said. "Where we're heading in society, though, is how many people you keep out of the hospital, rather than filling the hospital."

Parkview has rebuffed the partnership proposed by Mid Coast, and officials said they never considered partnering with the crosstown rival.

The state Department of Health and Human Services is set to examine Central Maine's proposal to acquire Parkview and the plan's effect on total health care expenditures, the competing demands in the area and whether less costly alternatives are available.

At the other end of the spectrum, Eastern Maine Medical Center in Bangor, Mercy Hospital of Portland and Maine Medical Center, also in Portland, had the highest occupancy rates of the hospitals that responded to questions.

Certain factors affect the average occupancy rates at hospitals, which have been falling nationally in recent decades as technology improves, patients spend less time in the hospital and more procedures are done on an outpatient basis.

Changes in insurance reimbursement also have put pressure on hospitals to cut costs and reduce the length of a patient's stay.

"There are competing risks. Extremely high occupancy rates cause problems of overcrowding and back-ups in emergency departments if there's not room for admissions. Too low is problematic because the revenue is too low to keep the hospital functioning. There's probably a sweet spot in the middle," said Dr. Karen Joynt, a health policy researcher with the Harvard School of Public Health.

A higher occupancy rate does not automatically mean a hospital is better off financially.

Many issues come into play, ranging from proper staffing for the number of occupied beds on any given day, to the severity of the cases, to the type of reimbursement or payment received, to the amount of charity care provided.

"Individuals can't live without a paycheck. Hospitals can't survive without filling beds," Litvak said. "There's no answer to the question of optimal occupancy. Overcrowding is bad but under-utilization raises other questions."

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