The Impact of Hard Times On the Hospital Industry

The American Hospital Association sent out a press release today (text below).  It describes a survey they conducted which outlines the impact of the economic downturn on U.S. hospitals.  While there is a lobbying aspect to their work, the information described in the press release appears to be sound, and illustrates the reasons why health reform is even more urgently needed during economic hard times.

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WASHINGTON (April 27, 2009) – Six out of ten hospitals nationally are seeing a greater proportion of patients without insurance coming through their emergency departments, according to a new survey from the American Hospital Association (AHA). At the same time, nearly half of hospitals reported they have cut staff. Recent employment information from the Bureau of Labor Statistics confirms that hospital employment is no longer growing and that the number of mass layoffs for hospitals reported in February was more than double what it was a year ago.

The majority of hospitals reported that fewer patients are seeking inpatient and elective services; however, many hospitals are seeing more patients covered by Medicaid and other public programs for those in need. Need for hospital-subsidized services such as clinics, screenings and outreach is increasing even as charitable contributions are down for many hospitals.

“Today’s findings signal what many of us in health care are concerned about: people put off care when they lose their job, which can complicate health care issues for many down the road,” said AHA President and CEO Rich Umbdenstock. “At the same time, the fact that hospitals are cutting staff challenges the notion that hospitals are recession-proof.”

The survey also found that the economy is affecting hospitals with nine in 10 hospitals making cutbacks to help weather the economic storm. At the same time, more than one in five hospitals reported reducing services their community depends on, such as behavioral health programs, post acute care, clinics and patient education.

“Community need for care remains high and in these tough times, communities turn to their local hospital,” Umbdenstock said. “Hospitals are walking a tightrope, trying to balance the growing needs of their communities with today’s economic challenges.” Despite taking these steps, the majority of hospitals are seeing a moderate or significant decline in their financial health in 2009 versus the same period in 2008. Many hospitals are struggling to make ends meet with over 40 percent expecting losses in the first quarter of 2009, jeopardizing their mission of caring for their communities.

The majority of hospitals reported fewer patients are seeking inpatient hospital care or elective care, further shrinking the resources hospitals rely on to meet the health needs of their communities. Financial measures such as days cash on hand that are important to creditors are slipping. If key measures fall below a certain level, creditors can require immediate repayment of borrowed money. Nearly all hospitals report that their ability to borrow funds to make improvements is getting worse or remains challenging. In a December survey, many hospitals reported that it was significantly more difficult or even impossible to access tax-exempt bonds and other sources of capital to make improvements.

Nearly eight of 10 hospitals have stopped, postponed or scaled back projects such as facility upgrades as well as clinical and information technology planned or already in progress. The survey, AHA’s second about the economic downturn’s impact on patients and communities hospitals serve, was sent to all 4,946 community hospitals in March. 1,078 responses were received, broadly representative of the universe of hospitals.