In another sign of the economy’s toll on the nation’s health care system, some
hospitals say they are seeing fewer paying patients — even as greater numbers of people are showing up at emergency rooms unable to pay their bills.
While the full effects of the downturn are likely to become more evident in coming months as more people lose their jobs and their insurance coverage, some hospitals say they are already experiencing a fall-off in patient admissions.
Some patients with insurance seem to be deferring treatments like knee replacements, hernia repairs and weight-loss surgeries — the kind of procedures that are among the most lucrative to hospitals. Just as consumers are hesitant to make any sort of big financial decision right now, some patients may feel too financially insecure to take time off work or spend what could be thousands of dollars in out-of-pocket expenses for elective treatments.
The possibility of putting off an expensive surgery or other major procedure has now become a frequent topic of conversation with patients, said Dr. Ted Epperly, a family practice doctor in Boise, Idaho, who also serves as president of the American Academy of Family Physicians. For some patients, he said, it is a matter of choosing between such fundamental needs as food and gas and their medical care. “They wait,” he said.
The loss of money-making procedures comes at a difficult time for hospitals because these treatments tend to subsidize the charity care and unpaid medical bills that are increasing as a result of the slow economy.
“The numbers are down in the past month, there’s no question about it,” said Dr. Richard Friedman, a surgeon at Beth Israel Medical Center in New York, although he said it said it was too early to call the decline a trend.
But many hospitals are responding quickly to a perceived change in their circumstances. Shands HealthCare, a nonprofit Florida hospital system, cited the poor economy and lower patient demand when it announced last month that it would shutter one of its eight hospitals and move patients and staff to its nearby facilities.
The 367-bed hospital that is closing, in Gainesville, lost $12 million last year, said Timothy Goldfarb, the system’s chief executive. “We cannot carry it anymore,” he said.
Some other hospitals, while saying they have not yet seen actual declines in patient admissions, have tried to curb costs by cutting jobs in recent weeks in anticipation of harder times. That includes prominent institutions like Massachusetts General in Boston and the University of Pittsburgh Medical Center, as well as smaller systems like Sunrise Health in Las Vegas.
“It’s safe to say hospitals are no longer recession-proof,” said David A. Rock, a health care consultant in New York.
A September survey of 112 nonprofit hospitals by a Citi Investment Research analyst, Gary Taylor, found that overall inpatient admissions were down 2 to 3 percent compared with a year earlier. About 62 percent of the hospitals in the survey reported flat or declining patient admissions.
Separately, HCA, the Nashville chain that operates about 160 for-profit hospitals around the country, reported flat admissions for the three months ended Sept. 30 compared with the period a year earlier, and a slight decline in inpatient surgeries.
Many people are probably going to the hospital only when they absolutely need to. “The only way they are going to tap the health care system is through the emergency room,” Mr. Taylor said.
And now, as the economy has slid more steeply toward recession in recent weeks, patient admissions seem to have declined even more sharply, some hospital industry experts say. “What we have not seen through midyear this year is the dramatic slowdown in volume we’re seeing right now,” said Scot Latimer, a consultant with Kurt Salmon Associates, which works closely with nonprofit hospitals.
While the drop-off in patient admissions may still seem relatively slight, hospital executives and consultants say it is already having a profound impact on many hospitals’ profitability. As fewer paying customers show up, there has been a steady increase in the demand for services by patients without insurance or other financial wherewithal, many of whom show up at hospital emergency rooms — which are legally obliged to treat them.
“It’s disproportionately affecting the bottom line,” Mr. Latimer said.
In California, for example, the amount of bad debt and charity care among hospitals has been steadily climbing, to $7.1 billion last year from about $5.8 billion in 2005. Those numbers could approach $8 billion for 2008, according to an analysis by Kurt Salmon.
The situation is exposing a main vulnerability of the nation’s hospital care system, which executives say relies heavily on private insurance to subsidize certain services. When there is a decline in profitable procedures paid for by private insurance, hospitals have less money to offset the relatively lower fees they receive from government insurance programs like Medicare and Medicaid.
“What happens in our country is that there’s really a hidden tax built in,” said Richard L. Gundling, an executive with a trade group for hospital financial executives, the Healthcare Financial Management Association. “Hospitals have to balance the mix of patients in order to survive.”
The amount of charity care provided by Shands HealthCare, the operator of the Gainesville hospital, has doubled in the last four years, to $115 million in fiscal 2008, Mr. Goldfarb said. He worries that the financial outlook will become even worse, with the prospect of payment cuts from state governments that are facing large budget shortfalls.
“If we’re going to survive the next few years,” he said, “we have to circle the wagons.”
The rapid moves by hospitals to cut costs — by laying off workers, consolidating facilities and freezing construction and other capital spending — are an abrupt change for an industry traditionally seen as insulated from economic woes.
Some hospital executives say they are simply being prudent. The University of Pittsburgh Medical Center, for example, is eliminating 500 jobs. The hospital system, which includes 20 hospitals and serves a large portion of Medicare and Medicaid patients, says that so far it has not seen a drop in patient admissions, but growth is tailing off.
“It’s much, much slower than we’ve seen in years past,” said Robert A. DeMichiei, Pittsburgh’s chief financial officer.
Mr. DeMichiei said Pittsburgh was mainly trying to reduce administrative jobs as a way to keep ahead of the worsening economy. Because large hospital groups like his have become more professionally managed in recent years, he said, they are no longer slow to reduce expenses.
Hospital executives “are beginning to act more like Corporate America,” said Mr. DeMichiei, whose own résumé includes various jobs at General Electric.
Another source of financial anxiety, hospitals say, is the continued difficulty in raising money through the credit markets. The majority of the nation’s hospitals are nonprofit, and they often raise capital through the municipal bond market to erect new buildings or make other significant capital investments. Because many hospitals say they are still unable to borrow easily, they have reacted by scaling back projects or holding off on major purchases.
“We are being extremely cautious about approving spending in these 60 to 90 days, until the markets stabilize,” said Michael A. Slubowski, the president of hospital and health networks for Trinity Health, a large Catholic system based in Novi, Mich., which operates nearly four dozen hospitals, mostly scattered across the Midwest.
While Trinity says it has not seen an overall reduction in its patient admissions, Mr. Slubowski says many of his counterparts have. “People are seeing declines,” he said.
Making matters worse for some hospitals has been a slowdown in bill payments, particularly by state Medicaid programs. The money hospitals are owed for their services — their accounts receivable — is growing, said Mr. Rock, the health care consultant, who works for the investment and consulting firm Carl Marks & Company in New York. “What we’re finding is one of the key drivers is Medicaid,” he said.
Many hospital executives also expect outright reductions in payments by Medicaid and Medicare.
Mr. Rock predicts that many hospitals will soon start to reconsider the services they provide, with an eye toward scaling back or eliminating some altogether. Procedures that rely heavily on patients’ making sizable cash outlays, like bariatric surgery, are particularly vulnerable, he said.
Hospital executives concede that they may not be as directly affected by the weak economy as retailers and banks, but they also say they are bracing for what is shaping up to be a severe and prolonged recession.
“There’s a lot of C.F.O. doom and gloom,” said Robert Shapiro, the chief financial officer at North Shore-Long Island Jewish Health System. “The sky may be really falling this time.”
So says the latest public opinion survey from the American Dietetic Assn., “Nutrition and You: Trends 2008.” The nationwide study asked 783 men and women their attitudes on healthful eating, the importance of diet and exercise, and even delved into reasons why people don’t do more to get healthy.