For-Profit Hospital's Medicare Top 100 DRGs - Analyst Study

For-Profit Hospital's Medicare Top 100 DRGs - Analyst Study

A security analyst recently released a report entitled Hospital Market Share Gains and Losses Medicare Top 100 DRGs on June 10, 2014.  CMS recently released the top 100 DRGs for Medicare beneficiaries. The analyst makes several interesting assumptions and/or conclusions from the data.

We agree with the analyst's assertion “that increasing market share is an important metric for judging how well a company’s management is performing.”  We also agree that hospitals are more successful at gaining or maintaining share in markets where they have some existing share. Another area of agreement is “the data provided by CMS for Medicare patients is a representative sample of each hospital company’s overall market share.”

Specifically, the analyst listed the following implications of the data:

  1. The Top 100 DRGs account for 60% of all hospital volume

  2. 30% of hospital admissions are Medicare

  3. The Hospital Referral Region (HRR) assigned by CMS is an appropriate service area to analyze market share

Let’s look at these three assumptions.

  1. The Top 100 DRGs account for 60% of all hospital volume  

The top 100 DRGs account for dramatically varying percentages of total hospital admissions. The top 100 DRG percentage of total volume depends on the hospital’s location, capabilities and service offerings.  For Hospitals designated as Sole Community Providers in rural or non-urban America, the top 100 DRG’s account for 75% of total volume. For hospitals in New York, Chicago, Los Angeles, Miami, Houston, or Atlanta, they account for just over 62%.

The analyst's statement is true from a national perspective, but all markets are not created equally in this area.

  1. 30% of Hospital Admissions are Medicare

Medicare accounts for 38% of hospital volumes nationally. But again, you have to understand the hospital’s community. Medicare is a larger volume payor for rural locations and for service areas with an older population. For ZIP codes designated as rural by the US Census, Medicare accounts for 41% of hospital volume. For urban designations, Medicare is 38% of total volume. A system’s dependence on Medicare will cause them to have a stronger reaction to shifts in population, care, and reimbursement.

  1. The Hospital Referral Region (HRR) assigned by CMS is an appropriate service area

The analyst takes 100% of each hospital system’s discharges as the numerator and compares the hospital’s discharges to all discharges from hospitals also located in the HRR for the denominator. The original CMS data itself does not indicate the ZIP Code or county from which the patient originated. Comparing critical access, sole community providers, and rural facilities to large academic medical centers and large urban medical centers is going to tell an inaccurate story of a hospital or system’s market share. Hospitals need to understand the specific geography and the people they serve.

We suggest studies compare hospitals based on the service areas where the focus is on 75% of their patients they serve. This map shows a system’s 78% of Medicare patient origin by ZIP code compared to their designated HRR. You will see the discrepancy in the two geographies.

HRR_ServiceAreas.png

In the past two days, Stratasan has run analysis on over 250 facilities and their actual service area to compare to the analyst study.

If you are interested in an analysis of your own market or your overall system, contact us today at sales@stratasan.com.

 

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