Ask the Home Care Data Guru
How do I determine the demand for inpatient hospice beds in my market?

Q: How do I determine the demand for inpatient hospice beds in my market?

A: One method to gauge market demand is to look at the ratio of general inpatient days to total days in your county of interest and compare it to a best-case scenario. For that scenario, we have chosen Florida, because of its predominant non-profit hospice provider base. (Some for-profit hospices have been known to abuse this aspect of the benefit).

In the 20% of counties in Florida with the highest ratio of general inpatient beds, all had at least 5.8% general inpatient days when compared to the total days for that county. This top quintile was almost 20% above the state average.

The next step is to identify the number of total hospice days used in your county and then multiply this number by 5.8%. Now take this result and subtract the number of inpatient days actually used from it to determine the unmet demand in days.

If a market has annual claims with 66,666 total Medicare hospice days on them and of which 1,867 days are billed as General Inpatient (GIP) services, for example, there is an unmet demand calculation as follows:

66,666 days x 5.8% = 3,867 potential GIP days
3,867 potential GIP days – 1867 billed GIP days = 2,000 days of unmet potential

This unmet demand could be met in a combination of ways:

  1. Increase the usage or occupancy rate in current inpatient bed settings.
  2. Increase the number of available beds.

One purpose of the unmet demand calculation could be to provide an initial reality check for a new freestanding inpatient facility. That is to say a market with 2,000 days of unmet demand, for example, would have difficulty supporting an additional 12-bed inpatient facility, whose profitability depended on 85% occupancy rate and 80% of its billed days being for GIP. This is evident in the following calculation:

12 beds x 360 days = 4320 bed days x 85% occupancy rate = 3672 occupied bed days x 80% GIP day mix = 2938 needed GIP days

In this example, there are 47% more GIP days required financially than the market could sustain. This method assumes a “best-case” scenario in terms of market maturity and not all markets may have achieved a sufficient level of maturity to obtain these results.