In the United States, the question has been asked time and again but never satisfactorily answered. By virtue of publically financed healthcare systems, the rest of the developed world has decided, to a greater or lesser extent, that medicine and healthcare are not pure businesses—that citizens have a right to care, even when they can’t pay all associated costs.
It’s starting to look like Americans won’t be able to duck the question for much longer.
In the last year, the profitability of U.S. hospitals eroded for the first time since the Great Recession, pushing some closer to and others over the solvency precipice. Revenues are down and costs are up. And these issues appear systemic and entrenched, giving rise to a series of important and relevant questions: How can hospitals adapt? If they do, will they still survive? And, do we as a nation think it’s important to make hospitals accessible, even if they lose money?
As recently reported in the New York Times, analysis by Moody’s Investors Service shows that this year nonprofit hospitals had their worst financial performance since the Great Recession. Among the 383 hospitals studied, revenue growth dipped from a 7 percent average to 3.9 percent on declining admissions. For the last two years, expenses have grown faster than revenues, and fully one quarter of all hospitals are operating at a loss.
In a word, Moody’s describes the situation as “unsustainable” because it is the product of what look like enduring realities:
- Private insurers did not increase payments to hospitals.
- Medicare reduced payments due to federal budget cuts.
- Demand for inpatient services declined as outpatient care options rose.
- Retail outpatient options now compete with hospital clinics.
- Patients with higher copays and deductibles chose not to seek care.
- Hospitals are buying up physician practices.
- The costs of electronic medical record systems are impacting the bottom line.