AHRQ Data Reveals Health System Search for Winning Formula

Pictures don’t lie. Neither do numbers. And these numbers paint of picture of U.S. hospitals and health systems remaking themselves in response to new economic forces challenging their long-term viability.

The numbers come from the Compendium of U.S. Health Systems database maintained by the Agency for Healthcare Research and Quality. 

AHRQ switched on public access to the database in 2017, and AHRQ researchers published their initial analysis of the health system data in the database in Medicare Care Research and Review in January 2019. That data is from 2016.

AHRQ researchers published their second analysis of the updated health system data in the database in Health Affairs late last month. That data is from 2018. 

As all journalists know, any time you can compare two sets of data from different times, you will find a story. Here’s the story I found: hospitals are forming more health systems, but they’re cutting beds and replacing them with more physicians, particularly primary care doctors.

Here are the numbers that told me that story:

• The number of health systems rose to 637 in 2018 from 626 in 2016. That an increase of 11, or about 2 percent. AHRQ defines a health system as one with at least one acute-care hospital and at least one group of physicians connected to the hospital or system through common ownership or management.
• Of the 11 new health systems, seven operate in only one state. The number of single-state health systems rose to 532 in 2018 from 525 in 2016.
• The other four new health systems operate in multiple states. The number of multi-state health systems rose to 105 in 2018 from 101 in 2016.
• The median number of beds in a health system, which had a median number of two hospitals in both 2016 and 2018, dropped to 406 in 2018 from 433 in 2016. That’s a decline of 27 beds, or a decline of more than 6 percent. 
• The median number of physicians in a system rose to 301 in 2018 from 245 in 2016. That’s an increase of 56, or nearly 23 percent. 
• The median number of primary care physicians in a system rose to 119 in 2018 from 93 in 2016. That’s an increase of 26, or nearly 28 percent.  

Now, you don’t have to be an economist to figure out what’s going on here. The composition of health systems is changing not for clinical reasons but for business reasons. That’s because health systems are businesses just like businesses in any other industry.

They’re building market share by merging with other hospitals, joining systems and acquiring physician practices to gain negotiating leverage over health plans. They’re reducing operating costs by cutting bed counts. They’re shifting business models away from acute care services to primary care. That’s because keeping healthy people healthy and chronically ill patients as healthy as possible is where the money is under value-based and population health-based reimbursement models. 

This shouldn’t shock anyone. The news is, the numbers verify what we all thought was going on.

If you have a different interpretation or see more in AHRQ’s numbers than I see, let me know at david.burda@4sighthealth.com.

Thanks for reading.