Analysts find inpatient volumes increasing for first time in many quarters

After multiple quarters of consistent declines in hospital inpatient volumes, financial analysts from Jefferies LLC found a modest 0.4 percent average inpatient admission increase in their survey on 2014 second quarter volume trends.

In addition, looking at executive optimism as measured by belief that volumes will continue to increase in the third quarter, the analysts noted that executives from larger hospitals — those with 250 or more beds — were the most likely to be optimistic on growth. They found this to be a positive sign for publically traded hospital operators such as Community Health Systems Inc. (CYH), HCA Holdings Inc. (HCA), and Tenet Healthcare Corp. (THC) and rated all of them as “buys.” Stocks for this group of companies were already doing well this month after Community Health Systems and Lifepoint Hospitals updated their expectations for fiscal year 2014 growth to reflect even greater growth than the companies had originally predicted.

Reasons given by the analysts for the increase in inpatient volume and expectation of further growth in the third quarter included the impact of the expansion of Medicaid under the Affordable Care Act and more people now taking care of long-delayed health care needs.

The analysts also found that emergency room volumes are up as Medicaid is expanded. Although one hope of the Affordable Care Act’s expansion of health insurance was that more patients would use lower-cost outpatient primary and urgent care settings instead of emergency rooms, initial research on expansion states finds that people new to healthcare coverage continue to go to emergency rooms for care because of a combination of factors, including being unfamiliar with how health insurance works and being inclined to go to the ER because that is where they are used to going for care. Of the 50 hospital executives Jeffries surveyed, 68 percent said they’d seen increased ER volumes in the second quarter, with 42 percent reporting 1 to 5 percent ER volume growth.

A final finding of the analysts was that hospitals will likely continue to seek physician outsourcing services for hospital-based specialties, especially hospitalists.