Category: Providers

Alternative Staffing Models Harming Patients

Posted on by Jason Barry

New research in Medical Care found that hospitals opting to replace registered nurses with non-RN staff could be sacrificing patient safety for short-term financial gains.

This was one of the largest-ever studies investigating the tradeoff between RNs and lower-wage labor, yet it received surprisingly little coverage given the implications of its findings.

UPenn researchers analyzed clinical and claims data for 6.5 million Medicare patients across 2,676 US hospitals in 2019, finding that every 10 percentage-point reduction in RNs was associated with:

  • 7% higher odds of in-hospital death
  • 1% higher odds of readmission
  • 2% increase in expected days
  • “Significantly” lower patient satisfaction

Hospitals are often pressured to pursue “team nursing” models for the immediate financial lift of substituting RNs with nurses’ aides or licensed practical nurses, but the authors warn that the true impact of using less skilled workers is likely the exact opposite.

  • The study estimates that a 10 percentage-point reduction in RNs would result in nearly 11k avoidable deaths annually and 5,207 preventable readmissions.
  • That translates into roughly $68.5M of additional Medicare costs each year, with hospitals also losing nearly $3B annually because of patients requiring longer stays.

Then why do hospitals continue substituting RNs with lower-wage staff? From the patient perspective, the negative impact on outcomes – let alone mortality – should stop the idea of lowering the skill-mix in its tracks. 

  • That said, the average hospital sees an instant cost reduction of $31.94 per patient day for every 10 percentage-point reduction in RNs to total nursing staff.

The financial near-sightedness of that $31.94 cost reduction blinds hospitals to an estimated $66.03 of lost revenue per patient day for the same 10pp reduction in skill-mix… in other words the expected ROI is more than a two-fold loss.

The Takeaway

Nursing budgets are a huge slice of the hospital expense pie, making them a go-to target when leadership teams are looking to make cuts to fund other areas. This study reaches the paradoxical conclusion that the reason hospitals don’t have funds for other areas could be because they aren’t investing enough in the nurses they’re thinking of cutting.

Physician Compensation Rebounds

Posted on by Jason Barry

The numbers are in. Doximity’s always-anticipated Physician Compensation Report showed that overall compensation grew 5.9% last year – a welcome rebound after the 2.4% dip in 2022. 

Survey responses from 33k doctors brought more good news than that, with medicine’s gender wage gap narrowing to 23%, down from 26% in 2022.

  • Decent improvement, but women physicians are still taking home an average of $102k less than men after controlling for specialty, location, and experience.

Neurosurgeons continued to top the charts at $764k, nearly 4X the annual compensation of their pediatric endocrinologist peers at the bottom of the totem pole ($217k).

Other interesting highlights from the report included the fact that 81% of physicians reported feeling overworked, causing many to consider an employment change (59%) or early retirement (30%).

  • 88% of physicians also said that their practice has been impacted by the physician shortage, three-quarters of which described the impact as “moderate” or “severe.”
  • Funnily enough, the physician shortage wasn’t even the leading contributor to burnout, which 70% of respondents pinned squarely on administrative burden.

Despite recording a slight increase, total physician compensation has dropped 26% since 2001 when accounting for inflation. As it currently stands, only 40% of physicians are happy with their compensation, and more of these disgruntled doctors are unfortunately eyeing the exit.

The Takeaway

Physicians are still overworked and the wage gap is barely moving in the right direction, but at least they can rest easy knowing inflation is barely eating into their total compensation…

Cross-Market Mergers Aren’t For the Patients

Posted on by Jason Barry

Make sure you’re sitting down for this one, because new research suggests that cross-market hospital mergers aren’t doing patient wallets any favors.

To investigate the impact of cross-market mergers on both prices and quality, researchers rounded up 214 hospitals that acquired hospitals further than 50 miles away, then compared them to 955 control hospitals without any merger activity during the study period. This was also the first study to use claims data to back its findings.

Six years after acquisition, acquirers had increased their prices for patients by an average of 12.9% relative to control hospitals, yet saw no discernible impact on mortality or readmissions.

  • The impact was even higher among serial acquirers with at least four separate acquisitions, which increased prices by a steep 16.3%. This wasn’t a small subset either, representing 45% of the M&A hospital group.
  • On top of that, there was a 21.8% price increase when the target’s market share was greater than the acquirer’s (vs. 9.7% when the opposite was true), which makes sense as smaller acquirers have more to gain from acquiring an entity with more market power.

There have been a couple of other studies examining the impact of cross-market mergers, but this was the first to use claims data to untangle some of the factors driving the price effects (serial acquisitions, target size) while showing no significant impact on quality.

Although the mechanisms behind the price effects weren’t within scope, there are a few potential reasons that likely contributed.

  • Common customers – If the target and acquirer hospitals both share the same customer, having a larger operational footprint improves bargaining power (e.g. employers need provider networks that span multiple patient markets if they have employees in multiple markets).
  • Tying – A health system with a strong position in one market could tie its services to a second market (e.g. a cutthroat system could operate at a loss in a second market to drive out competitors while staying afloat using margin from its primary market).
  • Change in control – Acquirer hospitals are able to increase prices at the target because it wasn’t maximizing profit for whatever reason. Given the increases this study shows at the acquirers themselves (which by definition didn’t change control), this one is probably ruled out.

The Takeaway

All-in-all, the evidence is mounting that competing hospitals don’t make massive acquisitions for altruistic reasons (earth-shattering, we know). If the scale wasn’t already tipped toward needing more antitrust scrutiny of cross-market mergers, this study seems to get us past the usual conclusion of “more research is needed.”

Does Private Equity Spike Adverse Events?

Posted on by Jason Barry

Private equity firms are back under fire for their impact on healthcare, this time for driving an outsized number of adverse events at the hospitals they acquire.

A large study published in JAMA showed that Medicare patients at hospitals acquired by private equity firms went on to experience significantly higher rates of adverse events – such as infections and falls – within just three years of the acquisition.

After comparing data from over 660k hospitalizations at 51 PE-owned hospitals to data from 4.2M hospitalizations at 259 non-PE-owned control hospitals from 2009 to 2019, researchers found that patients at the PE-owned hospitals experienced 25.4% more hospital-acquired adverse events (+4.6 events per 10k hospitalizations).

The increase in post-PE adverse events was driven by:

  • a 27.3% increase in falls 
  • a 37.7% increase in central line-associated bloodstream infections (despite PE-hospitals placing 16.2% fewer central lines)
  • a doubling of surgical site infections from 10.8 to 21.6 per 10k hospitalizations (despite an 8.1% reduction in surgical volume)

Another interesting finding was that the PE-hospitals had a slightly lower rate of in-hospital mortality than the non-PE-controls, which the authors said was likely because of the shift in patient mix once PE acquires a hospital.

  • Patients at the PE-hospitals were modestly younger, less likely to be dual eligible, and more likely to be transferred to other acute care hospitals after shorter lengths of stay.

The authors point out that many private equity firms take on heavy amounts of debt to acquire hospitals and flip them within a short timeframe, which has led to over $1 trillion of private equity investment flowing into healthcare within the last decade alone.

The Takeaway

This study is the latest addition to the growing mountain of research calling attention to private equity’s business-first perspective on healthcare, which often leads to the prioritization of revenue generation over things like… caring for patients. It might not take much longer for that attention to turn into action, with the Senate Budget Committee recently launching an investigation into the impact of PE hospital ownership and the consequences of post-acquisition cost-cutting.

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