Economic Crisis: Impact on Hospitals

The American Hospital Association has released its study of the economic crisis which shows an alarming deterioration in the financial condition of the nation's hospitals. As a consequence, 39% of hospitals are considering reductions in Information Technology capital investments and 45% are considering reductions in Clinical Technology.

The full report documents that patients are less likely to access hospitals for care and less likely to be able to pay for services.

Hospitals are having a much harder time paying their debt and have less access to capital. 33% of hospitals are reporting increased interest expense for variable rate bonds, with interest rates in the most recent quarter up 15% over the same time last year.

More than half of hospitals surveyed reported that they are also considering reductions in administrative costs and staff as other financial pressures bear down. Hospitals' total margins are down significantly in the third quarter 2007 from positive 6.1% to negative 1.6%.


The margin pressures include:

• Non-operating revenue is down significantly due to investment losses which are causing 31% of hospitals to increase funding in their pension plans.
  
• 38% of hospitals are reporting a moderate or significant decline in admissions and 31% are seeing a moderate or significant decline in elective procedures.
  
• Unemployment is increasing. Each 1% increase in national unemployment takes 2.5 million people off of employer health plans coverage.
• Uncompensated care is rising by 8% compared to the same quarter last year.
• Medicaid expenditures are increasing with increasing enrollment, but so too is the state Medicaid funding gap as the states confront their own budget deficits.
• Hospital payment shortfalls for Medicare and Medicaid are increasing