Hospitals Pinched by Economic Crisis

December 2nd, 2008 | Sources: Am. Hospital Assoc.

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During the Great Economic Crisis of 2008, fewer patients are seeking hospital care and more need help paying for it. Meanwhile hospitals are finding it more difficult to borrow money for facility and technology updates, according to a survey by the American Hospital Association.

More than 30% of 736 hospitals in the survey report a moderate to significant decline in patients seeking elective procedures. 40% have seen a drop in admissions. Uncompensated care rose 8% in the summer of 2008 versus a year earlier.

Meanwhile hospitals, like many institutions rely on investment income to make ends meet but precipitous stock market declines have turned those gains into losses.

Overall, Q3 margins for hospitals in the survey fell to -1.6% in 2008 vs. 6.1% in Q3 the previous year.

As a result 60% of the hospitals plan to or are considering administrative cost reductions. Similarly, 53% might reduce staff, and 27% might reduce services.

Capital projects will also take a hit, as the credit crunch has increased borrowing costs by 15% year-over-year. As a consequence, 56% of survey respondents are considering or will delay renovations and plans to increase capacity, 45% will delay purchasing clinical technology or equipment, and 39% will delay purchasing new information technology.

The situation is not expected to improve any time soon. Medicaid rosters are likely to skyrocket as the Crisis unfolds. Few hospitals break even on this population even now, and things would get worse if state budget woes trigger further Medicaid cuts.

“Hospitals are a critical part of our nation’s economy as the second largest private sector source of jobs,” noted AHA President Rich Umbdenstock. “In addition, every dollar spent by a hospital supports more than $2 of additional business activity in a community. The economic crisis is taking its toll on patients, communities and hospitals alike.”


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