Since 2015, Baylor Scott & White has added millions
of outpatient customers and increased outpatient surgeries by 50,000 a year.
By Mitchell Schnurman 6:00 AM
on Feb 4, 2020
Baylor Scott &
White Health is the largest not-for-profit hospital system in Texas, and it’s
growing like it.
In the past two
years, annual revenue increased by $1 billion and operating income more than
doubled to $725 million in 2019. Not bad for a nonprofit, especially when its
traditional business is in decline.
From 2017 to 2019,
Baylor’s annual hospital admissions fell by 13,000, a decline of 5.5%. And the
average number of hospital patients fell by 200 a day.
“Hospital inpatient
stays are no longer the best barometer of health care activity,” said CEO Jim Hinton. “We’re going to need to rethink the
measurements of success.”
Start with this: Last
year, Baylor had 12 million visits and encounters in its outpatient business --
3.5 million more than in 2015. That includes an increase of 50,000 outpatient
surgeries a year.
In 2019, 63.1% of
Baylor’s patient revenue came from the outpatient side, almost 4 percentage
points higher than four years earlier. And those trends are intentional.
“We have several
partnerships with companies in the outpatient world,” Hinton said, citing United Surgical Partners
International and Touchstone Medical Imaging.
“We’ve led this market in partnering with others to more dramatically increase
business into these ambulatory settings.”
The push for
value-based health care is all about getting people to the right treatment at
the right time, and avoiding costly hospital trips. Baylor has reduced the
average hospital stay to 4.4 days, a decline of almost 10% in four years.
Officials also
focused on cutting hospital readmissions, a major cost driver. When patients
check out, Baylor hospitals schedule follow-up appointments with their primary
care doctors, a proven strategy for improving outcomes.
Baylor also operates
a fast-growing accountable care organization with a vast
network of doctors, nurses and facilities. The ACO, which is projected to cover
over 800,000 lives this year, includes care managers to help patients navigate
the system.
The ACO has helped bend the cost curve in Baylor’s
employee health plan, keeping monthly premiums far below the growth in prices
nationwide. That record has helped attract customers with employer-sponsored
insurance, Medicare and Medicaid.
If the ACO helps
patients stay healthy -- by encouraging more primary care and ensuring that
patients keep up with their medication, for example -- the strategy is working
as envisioned, said Peter McCanna, president of the Baylor health
system.
“These efforts keep
people out of the hospital, and they use more outpatient services,” McCanna
said. “That reduces out-of-pocket costs and reduces the cost of care in the
health system.”
All that sounds
great, said Marianne Fazen, executive director of the Dallas-Fort Worth Business
Group on Health. But she’s skeptical about the beneficiaries of
such progress.
“When hospitals get
all this extra money, do they share it and lower prices?” Fazen said. “Or do
they open new medical centers up north? They’re all expanding because so many
high-paid employers and employees live up there.”
The D-FW business
group includes over 165 companies with about 238,000 workers. They work
together on strategies to lower health costs.
Fazen said many
employers have learned to live with steady increases in health prices, in part
because health insurance and legal compliance have become so complicated. She
said human resources departments have been getting smaller and many companies
are reluctant to dive into something new, such as ACO models.
“They just don’t have
the bandwidth to cover all these different battlefronts,” Fazen said.
In the past two
years, Baylor’s operating margins have increased from 3.2% to 7.2%. Those
earnings are important to making investments in the system, including $350 million
for electronic records, McCanna said.
That project,
expected to be completed by late summer, will make patient information
available on one record throughout the Baylor system. The records will become
“a building block to having much better coordination of care,” he said.
“We really believe
that better quality leads to more affordability and lower costs,” McCanna said.
Baylor is not exactly
a low-cost leader, at least according to a Rand Corp. study of hospital prices in 25
states. Rand found that private health plans were ponying up much more than the
government -- paying 241% of Medicare rates in 2017 in the states in the study.
Relative prices in
Texas were slightly higher, and the Baylor system was higher still, charging
264% of Medicare rates, Rand reported.
For many years,
prices paid by the government haven’t covered the actual costs of providing
care, McCanna said, so cost-shifting has been a feature of the U.S. health
system. Those with employer coverage have generally absorbed the financial hit.
And in Texas, such problems are exacerbated because 5 million residents don’t have insurance, far more
than in any state.
The shift toward more
outpatient service is a major step in the right direction, but provider markups
were even higher, Rand said. Baylor charged 330% more than Medicare rates for
outpatient work, about one-third more than its inpatient premium.
Baylor said it’s been
focusing on cutting expenses, but customers may not see that in their bills.
“We’ve taken a lot of
costs out of the system," said CEO Hinton, "and then reinvested in
digital capabilities and other venues.”
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