Sg2 2017 Impact of Change Forecast: Finding Growth

Each year at Sg2, we debut the latest health care projections from our Impact of Change® (IoC) national demand forecast. Sg2 has a track record of forecasting inpatient declines that mirror actual volume trends. This year is no exception, but with some checks and balances. Sg2 projects the downward impact on inpatient utilization to begin to plateau, as rising complexity and a growing elderly population push the limits in opportunities for care to shift outpatient.

Over the next 10 years, Sg2 projects a 2% decline in adult IP discharges and 15% growth in OP volumes across the US. The downward impact on IP demand continues, largely due to the shift from volume to value and increased scrutiny of health care costs by government and payers. Sg2 projects an uptick in OP shift for surgeries traditionally performed in the IP setting, resulting in a 4% decline for IP surgical admissions, and an 11% increase in overall OP surgeries from 2017 to 2022.

Outpatient and Observation Shift Begins to Plateau
Though the shift to value continues, challenges exist in terms of case mix acuity and the rising aging population. While ongoing OP shift will continue to drive IP use rates down over the next 5 to 10 years, the shift to observation care will taper. Significant shift to observation status has already taken place for many medical conditions, resulting in a higher-acuity IP population. Rising IP case mix can be demonstrated by recent Healthcare Cost and Utilization Project (HCUP) average length of stay (ALOS) trends, showing a reversal in ALOS decline trends with a 2.5% increase from 2011 to 2014.* Sg2’s observation forecast now tracks population growth, with 8% growth projected at 5 years.

With rising acuity in the IP setting, Sg2 predicts further increases in ALOS of 2% over the decade, which, when combined with the 2% decrease in IP discharges, will result in a 1% decline in overall adult IP days.

Three key areas of focus in Sg2’s 2017 forecast are: 1) the dynamic changes in health care policy and coverage; 2) the shift to value; and 3) consumer-driven forces. All have significant impacts on utilization and site of care. For the moment, the pace of CMS’s commitment to support the transition to value may have slowed, evidenced by the decision to delay all mandatory bundled payment programs. However, value initiatives such as commercial bundles and alternative payment contracting are attractive solutions to cost containment and will advance the transition to value. Policies with bipartisan support remain integral to this transition, such as the Quality Payment Program of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Medicare Advantage, and post-acute care site-neutral payment in the IMPACT Act. Increased consumerism, due to rising high-deductible health plans, alternative care options and financial transparency tools, further promotes the shift to value, as patients seek lower-cost services and sites of care.

New to the 2017 IoC!
The Impact of Change’s success is based on its foundation in disease-based forecasting. ICD diagnosis and procedure codes and CPT codes are grouped into clinically meaningful CARE Families (diseases) and Procedures (services) in the Sg2 CARE Grouper for easy understanding of growth opportunities across the care continuum.

Each year, we update the Sg2 CARE Grouper to account for new and retired codes and carve out new Procedures or CARE Families. This year we added 10 new OP CARE Procedures, including Addiction Therapy, Laryngoscopy, Sinus Endoscopy, Cystoscopy and Primary Shoulder Replacement. These additional procedures allow for line of sight into utilization and growth opportunities for these services.

Surgery is its own Service Line Group. We restructured our Service Line Groups to separate medicine from surgery so they now fall into 2 distinct Service Line Groups. The new taxonomy is consistent with the vast majority of health systems’ departmental structures in terms of which service lines are traditionally placed under surgery vs medicine. This change essentially involved mapping the existing Service Lines to either Medicine or Surgery Service Line Groups.

Impact factors are simplified. We have updated our impact factors to reflect the changing times, rolling the IP Sg2 Potentially Avoidable Admission Impact Factor into Systems of CARE and rolling the 30-Day Readmissions Impact Factor into Policy. There will now be 6 matching impact factors for the IP and OP forecast: Population, Epidemiology, Systems of CARE, Innovation/Technology, Policy, and Economy and Consumerism.

Utilization Trends Vary Significantly by Service Line
Key IP and OP service line forecast stories follow:

  • Ortho/spine: Inpatient declines are projected (–3% overall in 10 years). Osteoarthritis discharges comprise nearly 50% of all orthopedic discharges; these volumes are projected to decline 5% in the next 5 years, largely due to OP shift in primary joint replacement. Outpatient shift for many spine surgeries, including spine fusions, also will accelerate. As these surgeries shift OP and overall demand increases, expect ortho/spine surgical growth to soar by 35% during the same time period.**
    • Pockets of IP growth remain. For example, IP growth in revision joint replacements is projected at 21% in 5 years and 55% in 10 years (with no OP shift).
    • Capitalizing on high growth projections for OP ortho and spine surgeries will require understanding who owns these services. Consumer-driven care choices dominate the OP landscape for ortho/spine, dampening growth for rehab follow-up visits and shifting care away from the ED and hospital.
  • Cardiovascular: The significant IP declines in medical cardiology due to shift to observation will continue, but at a slower pace, as rising complexity and an aging population push the limits of future observation and OP shift. Technology advances and payment incentives continue to shift interventional cardiology and electrophysiology procedures OP, contributing to overall IP cardiology declines. At the same time, coronary artery bypass graft (CABG) and heart valve surgeries† will grow 13% and 27%, respectively, over the decade as expanded indications for these high-volume IP surgeries drive applications to new patient populations. Technology advances in transcatheter valve replacement will be a main driver of overall valve surgery growth, as applications for this procedure expand to lower-risk populations and mitral valve conditions.
  • Neurosciences: Inpatient growth projections continue, largely due to improved triage, increased demand for advanced stroke care, and expanded applications for diagnostics and treatment of epilepsy.
  • Women’s Health: Inpatient gynecology declines sharpen by –28% over 10 years, with accelerated OP shift for hysterectomy and limited IP growth for pelvic floor procedures. In obstetrics, birth rates are expected to remain flat, as immigration remains low and small family size becomes a cultural norm. At the same time, c-section rates will continue to decline as adoption of OB delivery guidelines and payer incentives to reduce primary c-sections roll out. Nationally, Sg2 is projecting the c-section rate decline to reach a floor of 26% of all live births in 10 years.
  • Neonatology: Projected declines have been tapered as we see early evidence of a leveling in preterm birth (PTB) rates following 8 consecutive years of annual decline. Further gains in PTB reductions will require clinical innovation as well as value-based payment incentives that support investment in high-risk PTB prevention programs. These are unlikely to take hold until the end of the decade.
  • Cancer: Advances in molecular diagnostics, immunotherapy and targeted treatment regimens will continue to erode IP medical oncology volumes, with admissions for “no procedure” expected to decline 23% over the decade. However, overall IP cancer declines will be mitigated by growth in surgery, as improved screening and diagnostics allow for earlier detection of cancer, expanding the pool of surgical candidates.
  • Surgery: Inpatient declines are projected for Sg2’s new Service Line Group (comprised of Burns and Wounds, ENT, Urology, General Surgery and Ophthalmology Service Lines), as OP shift for general surgery and urology procedures continues, driven by clinical innovation and payer pressures.

*HCUP data showed a 2.5% increase in ALOS for the adult population excluding OB, a 1.7% increase in ALOS for the adult population including OB, and a 1.9% increase in ALOS for all ages and all discharges from 2011 to 2014. **Ortho/spine OP surgeries are defined as Major Procedures and Arthroscopy for Ortho/Spine Service Lines for the adult population. Heart valve surgeries are defined in the Sg2 CARE Grouper as the combination of the following Sg2 Procedures: Surgical Valve Procedure and Transcatheter Valve Procedure.

Sources: Impact of Change® v17.0; NIS; Optum; CMS; Healthcare Cost and Utilization Project, 2016; Sg2 Analysis, 2017.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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