Hospitals still in a grim position


So, the American Hospital Association this week announced some recent financial statistics on member performance--and they don't paint a pretty picture. Elective procedures and admissions are down. Volumes of patients with low-pay safety-net insurance have climbed. Not surprisingly, six out of 10 hospitals surveyed by the group saw operating margins fall--and almost half have made job cuts.

The question now is, what will happen when the financial crunch eases? While the economy won't stay troubled forever--what goes down must eventually go up, right?--the troubles that helped to make hospitals unprofitable aren't going anywhere on their own:

* Community not-for-profits are still going to be under pressure to pay for high volumes of uninsured patients; even if a universal coverage requirement--a la Massachusetts--is put in place, hospitals will still be stuck with large unpaid bills if the health plans put in place have high deductibles.

* Urban hospitals, arguably, face even higher loads of uninsured patients, not to mention costly trauma services in some cases, and emergency departments that look like something out of a MASH unit. If they're public hospitals, their problems are multiplied by the need to finance all of this craziness on a fluctuating county or state budget.

* Even if every American gets health coverage with a reasonable deductible, I'm doubting it will reimburse at levels comparable to standard commercial insurance--which isn't exactly a treasure trove to begin with.

* As we've noted in a previous column, academic medical centers are "battleships" (bastions of conservatism, really) which aren't going to turn their business models around quickly in a next-gen healthcare environment under federalized health insurance or other wildly changed environments.

* Oh, and let's not forget rural hospitals which, while badly needed, struggle to survive due to their low volumes and lack of richly-insured patients.

Now, I'm not here to say that the solution is increased government funding for all, as some hospital groups suggest. I didn't just fall off the turnip truck yesterday, and I haven't missed, say, the way some of the less honorable hospitals use their not-for-profit tax abatements. (In short, they aren't exactly giving lollipops--or free surgeries--to babies.)

No, I'm proposing more of a structural change in the way hospitals cooperate in the community generally, one which falls along the lines of what New York state's Berger Commission enacted recently. I'm thinking that it's about time to consolidate more facilities, close the less needed and provide powerful incentives to cooperate, rather than engage in the dogfights that are more common in battleground areas sought after by competing hospitals. And on top of that, not-for-profits should be required to do more to serve rural areas, whether they like it or not.

So, readers, what do you think? Is a national massive restructuring of the hospital industry in the cards, or even a modest one? Surely you don't think market forces are going to take costs out of the system quickly enough to solve these problems, do you? - Anne

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