|AHA Reports Hospitals In Financial Danger As Less Patients Seek Care
Fewer patients are seeking hospital care while at the
same time a growing proportion of patients need help paying for care,
spelling out rough revenues for hospitals, according to a report from
the American Hospital Association (AHA).
Hospitals, which employ 5 million people nationwide,
could be facing uncertain times as their financial health falters and
ability to borrow funds for improving facilities and updating
technology is squeezed, said AHA.
Many hospitals are beginning to see the effects of the
economic downturn with more than 30 percent of survey respondents
reporting a moderate to significant decline in patients seeking
elective procedures, and nearly 40 percent of respondents reporting a
drop in admissions overall.
The majority of hospitals surveyed also noted an
increase in the proportion of patients unable to pay for care.
Uncompensated care was up 8 percent from July 2008 to September 2008
versus the same period in 2007, according to the report.
"The economic downturn has meant real pain for families
and communities. For many, a pink slip also means losing vital health
coverage and represents tough choices about the family budget," said
Rich Umbdenstock, AHA president and CEO.
"This report underscores those decisions as people put
off needed healthcare, as well as the challenges hospitals face as they
work to meet the needs of their community," he said.
Hospitals have seen the immediate impact of the economic downturn in other ways.
According to the report, total margins fell to negative
1.6 percent in the 3rd quarter of 2008 versus positive 6.1 percent
during the same period in 2007. Like many institutions, hospitals rely
on investment income as one of the ways to help make ends meet,
especially since government payors do not cover the costs of care.
However, recent turmoil in the stock market has turned
investment gains to losses, further worsening hospitals’
financial condition, AHA said.
At the same time, Medicaid expenditures, the largest and
fastest growing portion of many state budgets, increase even faster
during economic downturns as enrollment grows and state tax revenues
State and federal budget difficulties raise worries
about potential cuts to Medicare and Medicaid, which cover half of the
patient care provided by the nation’s hospitals. Financial stress
is forcing hospitals to make or consider making cutbacks to weather the
economic storm including cutting administrative costs (60 percent),
reducing staff (53 percent) and reducing services (27), among the
hospitals surveyed, said AHA.
All of these pressures are leading to a decline in
hospitals’ financial health, which could ultimately affect local
"Hospitals are a critical part of our nation’s
economy as the second largest private sector source ofjobs," noted
Umbdenstock. "In addition, every dollar spent by a hospital supports
more than $2 of additional business activity in a community. But cuts
to Medicare and Medicaid may stunt hospitals’ ability to help
drive economic growth. The economic crisis is taking its toll on
patients, communities and hospitals alike."
The report also showed that the credit crunch is
increasing the costs of borrowing money, making it more difficult for
hospitals to find the financing for facility and technology
improvements. Hospitals saw interest payments on borrowed funds
increase by an average of 15 percent from July 2008 to September 2008
versus the same period in 2007, according to AHA.
As a result, many hospitals are reconsidering or
postponing investments in facilities or equipment communities rely on
for care. For instance:
- 56 percent of survey respondents are considering or holding off on renovations or plans to increase capacity;
- 45 percent are delaying purchase of clinical technology or equipment; and
- 39 percent are putting off investments in new information technology.
The report was compiled of: The Economic Crisis: Impact
on Hospitals, a survey of data from 736 hospitals from late October
2008 through Nov. 10, 2008; and DATABANK figures represent early
results from 557 hospitals reporting data for July through September
2007 and 2008 as of Nov. 11, 2008.
Address: American Hospital Association, One North Franklin, Chicago, IL 60606; (312) 422-3000, www.aha.org.