How Would You Summarize the Financial Stress of 2011? 3 Hospital Leaders Respond
Moody's Investors Service found that 20 percent of non-profit hospitals examined by the credit rating agency were losing money on operations. Additionally, 63 percent of non-profit hospitals had operating margins of 0 to 5 percent, and overall, the median revenue growth rate of non-profits is at 4 percent, the lowest in two decades.
For-profit hospitals have not been immune to the stagnant financial times either. Some for-profit hospital operators, such as Nashville, Tenn.-based Hospital Corporation of America, have said low demand in some surgeries led to lower financial postings earlier in the year.
As 2011 winds down, one for-profit hospital leader, one non-profit hospital leader and one hospital leader that deals with both sides look back and summarize how the financial tides of the past year have impacted their institutions.
Krystal Mims, President, Texas Health Partners (Addison, Texas). As it was for almost all hospitals, 2011 was a financially challenging environment for physician-investor-owned hospitals. Texas Health Partners identified five factors that were the most prominent.
The first, of course, was the general state of the economy which caused people to rethink their decisions about both the timing and the extent of elective procedures. Less expensive alternatives might have been substituted for joint replacement surgery, for example.
Second, the push toward health savings accounts and higher-deductible insurance plans also caused people to be more conservative in their healthcare-related spending. Many potential patients appeared to be more likely to forgo procedures that required large out-of-pocket expenditures.
The third financial stressor was the tight capital markets for expansion and medical technology purchases. Even though interest rates were at historically low rates, banks and other traditional sources of capital were much more conservative in their lending practices.
Uncertainty in the regulatory environment was a fourth and very significant financial stress point in 2011. Hospitals found it difficult to plan for the future with so many unknowns still lurking in the shadows related to reimbursement levels, insurance coverage mandates and, especially, the regulations for and the potential impact of accountable care organizations.
The fifth factor was the acceleration in the rate of hospital-physician alignment. More physicians and physician practice groups began seeking employment or consolidation opportunities. That required health systems to commit significant financial resources to formation of new physician organizations or acquisition of existing groups. The costs of effectively integrating physician practices into health systems can be a considerable financial stressor for even the largest and most financially strong organizations.
While the financial pressures were significant in 2011, Texas Health Partners and our affiliated physician-owned hospitals continued to thrive in the face of these challenges. Strong relationships with Texas Health Resources and physicians — both investors and non-investors — were key to the continued strength and success of the organization.
Joseph Quagliata, President and CEO, South Nassau Communities Hospital (Oceanside, N.Y.). The financial stress for 2011 is high. We continue to organize our effort to deal with a substantial reduction in the Medicare and Medicaid revenue stream while investing in the programs that enhance the health needs of the communities we serve. The stress is exacerbated by the dramatic effect on pension funding requirements caused by low long-term investment returns and negative investment portfolio results for the year.
All of this takes place in an increasingly competitive market place that is rapidly changing the relationship of the voluntary physician to the hospital. The commercial and governmental payors are insisting on demonstrable enhances to quality outcomes and systemic changes to the delivery system without making the investments that would facilitate these changes.
John Tressa, RN, CEO, Park Plaza Hospital (Houston). The financial stress facing hospitals in 2011 is pervasive. Park Plaza Hospital is no exception as the ever-changing economic landscape due to the recession, job loss and overall financial downturn for so many individuals has resulted in a decrease in inpatient admissions and outpatient visits, as well as overall revenue.
We hear stories from patients and our physicians on what seems to be a daily basis regarding the challenges that changes in healthcare coverage, increased premiums and high deductibles and co-insurance have created. Patients are often faced with the decision of receiving healthcare or providing for the needs of themselves and their family. We have found this to be especially true in patients seeking elective healthcare procedures.
Fewer patients and decreasing revenues have increased the already fierce competition between acute-care hospitals and freestanding centers — such as imaging centers, ambulatory surgery centers and freestanding emergency departments — that provide options to patients who are informed about their healthcare and drive their decisions based on cost and service.
Our strategy to weather this economic storm is to ensure that our hospital provides the best possible quality care, easy access and personalized service to both our patients and physicians and to ensure we drive patient and physician loyalty by exceeding their expectations daily.
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