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Dig Deeper to Expose Volumes Susceptible to OP Procedure Shift

The following is an excerpt from Procedure Sites of the Future: Transitions and Growth Across HOPDs, ASCs. Sg2 members can read the full publication and view other facility planning resources in the Facility Planning Resource Kit on intel.sg2.com.

In addition to wide variation across service lines, procedures and markets, the timing and magnitude of OP shift differ even between hospitals within a system and, ultimately, among individual physicians. To project and prepare for the financial impact of a potential OP shift of the high-margin procedures that are the mainstay of the organization’s bottom line, health care leaders must go beyond traditional analyses and explore more granular details.

Challenge Traditional Metrics

For example, to estimate the financial impact of OP shift of total knee replacement, an executive would begin with traditional, backward-looking metrics: volumes, payer mix, revenue, cost and contribution margin over the past few years. Contribution margin will of course depend on payer mix, contracted rates and costs. But if cases begin to shift to a lower-acuity site, margins will likely shrink, taking a substantial bite out of hospital profit. As (for Medicare patients only), the potential topline percentage change due to an OP site shift is significant. Even shifting from IP to Full HOPD within the 4 walls of the hospital can result in a 12% decrease in revenue. And cases that shift to an ASC may be lost to the health system altogether.

Graph showing the impact of site shift on revenue in the case of total knee replacements

Dive Into Granular Details

Traditional pro formas to estimate the financial impact of OP shift are limited. To truly understand it, executives must go deeper and determine:

  • What portion of the IP business is ready to shift?
  • Which physicians are doing the most cases with a 1-day LOS?
  • Who are the patients?

A fine-grained analysis of potential OP shift clarifies the organization’s vulnerabilities. But with OP procedures growing at double- or even triple-digit rates, there will be winners amid this transition. Capitalizing on this growth will depend on implementing strategies that address vulnerabilities but also leverage the organization’s counterbalancing capabilities.

Are you an Sg2 member? Get in-depth examples for each of the 3 questions above, as well as insights on accelerators driving the shift to lower-cost sites, how the shift varies by service line and 4 key building blocks for success in the ambulatory procedure arena by reading the full report Procedure Sites of the Future: Transitions and Growth Across HOPDs, ASCs, on intel.sg2.com. Reach out to your account team for help with how to position your organization for success in the ambulatory procedure arena!

Not an Sg2 member yet? Sg2 has the analytic resources to help you quantify the ambulatory shifts occurring in your market and the expertise develop the right strategies to succeed in this changing environment. Contact us today to find out how partnering with Sg2 can support your care delivery strategies.

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