This story shows how tough times affect patients and patients’ tough economic times affect hospitals.

• Elective patients who have some ability to time a hospital admission, and who are most likely to have private insurance, may make up only 10 percent of the hospital’s annual patient admissions, but they provide, in many cases, 25 percent of their margins (revenues over expenses), says this New York Times story. (Ed. Note: Private plans pay higher rates, which is clearly understood by all parties at contract negotiating time.)

• Private pay patients provide a hospital with the ability to cover the costs for patients who have government-sponsored insurance, such as Medicare or Medicaid, which pay lower rates, as well as patients who have no insurance at all. (Ed. Note: When Medicare legislation was passed in 1964, there was an understanding that Medicare would provide a “floor” for hospitals to enable them to make their base operating expenses and private insurers would provide their “margins,” revenues above expenses. Although Medicare no longer provides that “floor” as it did for many years, Medicare patients’ usage rates and government-paid care is a source of predictable income for hospitals. Older patients need more hospital services than any other patient group.)

• Patients in many parts of the country are either delaying elective admissions because they are worried about costs or are hurrying to have surgeries done because they are worried about lay-offs, according to the Times.

• “A study released in November by the American Hospital Association found that about one-third of hospitals had seen either a moderate or significant decrease in elective procedures in the previous three months. More recent studies in states like New Jersey and Georgia have put the figure closer to 50 percent. Ambulatory surgical centers, which had experienced exponential growth over the last decade, are also reporting a slowdown in some markets,” this story says. (Emphasis added)

• The loss of revenue + growth in uncompensated care+ declining charitable contributions+ battered investments and tight credit is a toxic combination for hospitals. (Ed. Note: Hospital financial officers count underfunded care of all kinds, including federal and state government programs which pay less than actual costs as well as care for patients who have no insurance of any kind.)

• This combination of economic events results in hospitals laying off workers, postponing needed expansions and canceling equipment purchases.

• (Ed. Note: In many communities, hospitals may be one of an area’s, or region’s, largest employers. When layoffs happen at those hospitals, there is still more pocketbook pain in those communities due to job layoffs or cutbacks in hours.)

New York Times

Source: New York Times, March 14, 2009