Forty percent of American hospitals have seen drops in inpatient admissions, according to the American Hospital Association.
In the AHA’s survey, Report on the Economic Crisis: Initial Impact on Hospitals, it’s clear that hospitals are already experiencing the effects of the economic downturn.
CEOs are considering several cost-cutting tactics in dealing with this financial crisis:
- 56% of CEOs are postponing renovations or plans to increase capacity
- 45% are delaying purchase of clinical technology or equipment
- 39% are postponing investments in new information technology.
The AHA polled 736 hospital CEOs, concluding the survey in November 2008. Additional data was available from AHA’s DATABANK research, which tracks hospital trends.Between July and September, uncompensated care to hospitals increased by 8% compared to the same period in 2007.
Hospital margins fell to -1.6% in 3Q08 compared to +6.1% in 2007. Interest payments on hospital borrowing rose by an average of 15% in the period.
Thus it will be no surprise that hospital CEOs are considering cuts in their operations in administration (cited by 60% if CEOs), staff reductions (53%), and cutting services (27%).
Jane’s Hot Points: The AHA survey is telling us that the U.S. hospital microeconomy is suffering. Moody’s, the ratings agency, expects continued challenges in the hospital sector in terms of capital markets and bond ratings.
In 2009, we’re looking to hospitals to continue to upgrade, provide their communities with innovative technology and procedures, and staff up to prevent over-crowded emergency rooms. We’re also asking health providers to move along in digitizing medical records, which will require the outlay of both capital and labor — both of which are already squeezed to the bone.
The long-term gains in allocating capital to adopt and implement electronic health record systems could get obscured and overwhelmed by the short-term practicalities of providers’ needing to keep their fiscal heads above the stormy waters in 2009. If we mean as a nation to get up and running with EHRs, this is a line item that will need surgical targeting when it comes to budget- and legislative-making from the Federal government to the local level.
Keep in mind, too, that the hospital microeconomy is a substantial component of the larger national macroeconomy. Hospitals employ 5 million people in the U.S. In April 2008, I wrote about the importance of hospitals in their local economies in a post called, Why It’s Impossible to Close a Hospital.
For every dollar spent by a hospital, an additional $2 accrues to the local community, according to the AHA.
So it’s not only auto industry jobs that have spillover effects into the community.