HCI3 Improving Incentives Issue Brief: Hospital Bed Supply and Hospitalizations

HCI3 Improving Incentives Issue Brief: Hospital Bed Supply and Hospitalizations

A Tale of Four Cities

Objective: To understand the relationship between the supply of hospital beds and the frequency of hospitalizations in four comparable U.S. cities.

Methods: The Pittsburgh Business Group on Health (PBGH) commissioned a study that compares, among other indicators, the number of hospitals, hospitalizations, and other hospital-related utilization metrics in the Pittsburgh Metropolitan Statistical Area (MSA) with that of the Cleveland, St. Louis, and Cincinnati MSAs. The study used the most recent data from the federal Bureau of Labor Statistics and IMS Health to compile MSA-level estimates of the supply of hospital beds, the frequency of hospitalizations and emergency department visits, and staffing. HCI3 used internally generated benchmarks to estimate the average cost of a bed day and the total costs per capita of hospitalizations in each MSA. In addition, data on 2007 inpatient days per Medicare enrollee from the Dartmouth Atlas were used to compare the Pittsburgh, Cleveland, Cincinnati, and St. Louis hospital referral centers.

Results: Pittsburgh, Cincinnati, St. Louis, and Cleveland have an average utilization of hospital beds per 1,000 residents of 751, 512, 591, and 694 respectively. The MSA-wide Medicare case mix index is 1.654, 1.674, 1.644, and 1.483 respectively, and the average adjusted length of stay is 5.4, 5.0, 4.9, and 4.3. The Dartmouth Atlas reported a casemix and severity-adjusted rate of inpatient days per Medicare enrollee of 2.19, 1.66, 1.99, and 1.89 respectively. The average cost of a bed day for commercially insured patients is estimated to be $4,000 including facility and associated professional services costs. Assuming that commercially insured patients absorb the additional utilization in each community relative to Cincinnati, the annual burden for the additional hospitalizations is $187 million, $74 million, and $127 million respectively for Pittsburgh, St. Louis, and Cleveland.

Conclusions: The supply of bed days and the length of the adjusted stays per hospitalization in each MSA combine to create a larger number of bed days billed per 1,000 residents and significantly increase the overall costs of care for each MSA. State and local governments should carefully weigh the costs of the added burden caused by the addition of hospital bed capacity against the potential benefit from additional jobs created by a new facility.