This article is written by Palak Shah and originally appeared on modernhealthcare.com.
The healthcare landscape in the U.S. is under threat. With serious financial challenges, a large proportion of hospitals continue to operate at a loss. A report by the American Hospital Association reveals that 53% of hospitals in the U.S. are projected to experience negative margins in 2023, while a more dismal forecast suggests that this number could rise to 68%.
Three primary factors contribute to this: staff shortages, escalating labor and supply costs, and unstable supply chains. Hospital expenditures saw an increase of $135 billion in 2022 compared to the previous year, with labor costs accounting for $86 billion and non-labor expenses rising by $49 billion. Inflation has also elevated costs for supplies.
The necessity of hospitals to innovate through novel partnerships
With the serious financial challenges expected to continue through 2023, an increasing number of hospitals are reframing how they view and engage in strategic partnerships.
Previously, hospitals predominantly secured partnerships for the purpose of collaboration around physical facilities and services. However, the allocation of capital investment funds for such projects has become increasingly challenging. As a result, hospitals are compelled to explore groundbreaking models that expand access and coverage - and engage patients in a manner consistent with patient preferences for treatment.
One particularly captivating approach involves extending outpatient care services to patients' homes. This is not driven by patients being confined or homebound, but, rather, by their inclination towards the convenience and safety afforded by at-home care delivery. In fact, McKinsey reports that up to $265 billion worth of care services, representing up to 25% of the total cost of care, is expected to shift to the home by 2025.
A prime example of innovation via partnership is outpatient physical therapy, with companies such as Luna equipping hospitals with the means to efficiently provide care at home and establish an enticing new service line for patients. In particular, services such as outpatient physical therapy are immediately applicable to at-home care, as 87% of cases treated at a facility can be appropriately served in the home.
There are about 38,000 physical therapy clinics in the U.S. (by comparison, there are only 16,000 Starbucks locations). These clinics often focus on attracting hospital patients by leveraging their geographical and accessibility advantages. In order to effectively compete, hospitals are left with two options: either investing to expand the number of facility locations, which can be cost-prohibitive, or implementing a delivery service, such as Luna.
Benefits of enabling at-home care models
Strategic partnerships that feature in-home healthcare at their core are on the rise as they yield many benefits for hospitals:
- Expanded access and care capacity: Partnerships of this nature can improve access to care and capacity, providing superior geographic coverage for patients.
- Capital efficiency: These services do not necessitate capital investments in facilities and are perceived by patients as more appealing care options, thereby fostering a competitive edge against local rival clinics.
- Reducing leakage: All hospitals grapple with outflow, and outpatient physical therapy referral leakage is a significant concern, with the typical healthcare system experiencing a 55%+ PT referral leakage rate. The financial implications are compelling, with an anticipated loss of $20 million for every 10,000 patients leaving the system.
- Improved adherence, outcomes, and patient satisfaction: Such partnerships amplify patient engagement, satisfaction, adherence, convenience, and access to care. All of these benefits lead to enhanced continuity of care.
Throughout the pandemic, patients widely embraced virtual services; however, as the pandemic has subsided, interest in virtual-only services has diminished. This is particularly evident in fields like physical therapy, where hands-on, in-person care is now considered a materially more desirable option.
Additionally, by leveraging outpatient physical therapy at home as opposed to traditional home health services, hospitals can reduce the costs associated with post-surgical rehabilitation, resulting in an average savings of $2,600 per case. However, this benefit only applies when the hospital is at risk for the cost of care, such as in a Total Joint Replacement (TJR) bundle program.
Luna has successfully established partnerships with renowned hospitals such as Emory Healthcare, MedStar Health, Providence Health, Intermountain Healthcare, Scripps Health, and more. These collaborations facilitate in-person, in-home physical therapy, offering patients an alternative to seeking care at competing community clinics.
“Scripps is continuously seeking innovative ways to enhance our care delivery. Partnering with Luna for at-home outpatient care expands our access and reach across our market,” said Lisa Risser, corporate senior vice president of ancillary operations at Scripps Health.
Key success factors for Luna's hospital partnerships
In-home, in-person care partnerships work particularly well in certain fields, including physical therapy, and there are numerous reasons why Luna has become the go-to partner for the country’s most respected hospitals.
- Retaining patients: Hospitals can effectively retain their patient base without surrendering them to community clinics, particularly when their own rehabilitation facilities have reached capacity or are situated beyond convenient driving distances for patients. This preservation of patients within the hospital's care system not only promotes continuity of care but also creates an accretive revenue stream.
- No diversion of existing staff: The Luna model eliminates the need for overburdening current hospital clinicians with additional responsibilities to ensure the smooth operation of the service. Instead, Luna brings its physical therapist care capacity to bear on behalf of the hospital. Furthermore, Luna capitalizes on its extensive network of therapists to provide care throughout the entire metropolitan region where the hospital operates. Luna maintains a roster of 200-300 therapists across a metro area available for care, ensuring high service reliability and efficient drive times.
- Swift implementation: Luna's model is designed for expeditious implementation, generating value within weeks or months rather than the conventional quarters.
- Maintain facility-based volumes: Implementing a new service should focus on growing the patient base, not reducing in-clinic activity.
Luna has successfully overcome potential obstacles and requirements to successful partnerships, including demonstrating itself as a dependable partner capable of scaling the service, integrating its clinical processes and protocols seamlessly, and leveraging its technology platforms to guarantee efficient care delivery.
"By giving our patients the option to go to one of our physical therapy offices (if it’s convenient to them) or to have the option of having physical therapy at home just extends another opportunity for them when it’s not practical for them to be coming in multiple times a week to one of our therapy clinics,” said Dr. Boden, vice president of business development and chair of the orthopaedic department at Emory Healthcare. “It allows us to have a better continuum of care with a larger number of patients that we otherwise wouldn't have reached when it came to rehab.”
Lessons learned from Luna's strategic partnership model
Over half of hospitals are predicted to face negative margins in 2023. To counter this, hospitals must adapt and innovate their care provision by partnering with trusted, innovative organizations such as Luna.
There are many lessons that hospitals can learn from Luna's strategic partnership model:
- Leverage best-in-class platforms like Luna for innovative care: Partnerships with providers like Luna can help hospitals offer new care delivery models into the home, without the need for capital investments into new facilities.
- Patient choice and experience: By enabling at-home care, hospitals are meeting patients where they are and are giving them more choice around how they consume care.
- Prioritize rapid implementation: Hospitals should seek trusted partners with solutions that can be implemented quickly, delivering value and improving patient care in a short timeframe.
The financial struggles of hospitals are a serious concern, with over half predicted to face negative margins in 2023. To address these challenges, hospitals must consider strategic partnerships to adapt and evolve their care model. Physical therapy partnerships, like those with Luna, improve access, reduce costs, and enhance patient satisfaction. These partnerships are helping hospitals to navigate the challenging economic climate and continue to deliver quality care to their patients.
