In the Darwinian world of healthcare today, public hospitals may not be fit enough to survive.
As standalone hospitals, they don't have the resources to upgrade and meet new requirements, the Wall Street Journal reports. Bad credit ratings and expected government cuts to aid mean these hospitals are not in a good position to invest in health IT or manage bundled payments.
What's more, because public hospitals are usually solo operations, they cannot take advantage of economies of scale and more favorable insurance contracts that boost revenue at larger health systems.
"By the nature of their small size, their independence and their political entanglements, they are poorly equipped to survive," James Burgdorfer, a partner with Juniper Advisory LLC in Chicago, told the Journal.
It doesn't help that local governments can't count on as much tax revenue in this tough economy. Many have debt to service. Plus, more patients don't have health insurance, according to the Wall Street Journal blog.
In response to rising debt and high projected costs, many cash-poor local governments are looking to offload their public hospitals, the Journal reports.
Lauderdale County officials in Alabama inked a deal to transfer 350-bed Eliza Coffee Memorial Hospital and other facilities to RegionalCare Hospital Partners, which agreed to pay off $140 million in hospital debt. RegionalCare also promised to build a new 300-bed medical center. In Kenai Peninsula Borough, Alaska, a debate rages about a possible joint venture to sell most of a 49-bed hospital. Prince George's County Md. wants to sell its medical complex.
In 2008, Bannock County, Idaho, ceded control of the 250-bed Portneuf Medical Center in Pocatello. Now, the for-profit LHP Hospital Group Inc. of Plano, Texas, owns 77 percent of the hospital. A foundation owns the rest. LHP also spent $201 million to finish building a new hospital.
The county commissioner notes that it would have been impossible to restructure before the deal. "The only way we could do it was to go out and find a partner," he told the Journal.
To learn more:
- read the Wall Street Journal article and blog