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For hospitals, something's gotta give


Whoa! I don't know about you folks, but after reading some of this week's hospital finance news, it looks to me like things just can't hold together as they have been for too much longer. And since we don't have an entity like the banking industry's FDIC to step in and guarantee their finances, I predict that we may be on the verge of a wave of closures that hasn't been seen in decades. (Yeah, I know--sorry to be such a bummer.)

Of course, even without the subprime meltdown and subsequent Wall Street flame-out, many hospitals' financial indicators have been heading in the wrong direction. Now, with the economy pushing consumers to postpone even somewhat elective services, and self-pay debt levels rising--just to name a couple of new bogeymen--it's gotten a notch or two worse. And hospitals are taking some pretty risky steps to cope with the situation.

As you'll see elsewhere in today's issue, some hospitals are responding by digging into their investment income more deeply than usual, using it to finance capital projects, or even meet operational needs. Others are issuing bonds with the scary codicil that they'll buy them back if finicky investors want to dump them. 

Both of these situations put a huge squeeze on hospitals' long-term viability. One robs from their long-term assets to solve medium-term problems (like how to buy the IT gadget of the week), while the other puts the hospitals at risk of being bled dry by investors who get spooked. 

Of course, I'm not suggesting that smart investment in capital projects is a foolish use of capital, including investment capital. Hey, it might be a smarter use of your money and have more upside than many of today's Wall Street vehicles. But it is a scary way to go. And as for the bond buy-backs, they're an even bigger risk that exposes the institution to catastrophic problems, or even complete failure.

Honestly, I'm sure there are some good news stories out there on the capital financing front, but they haven't reached my desk. Hey, if you've got some, please write to me and tell me about them. I'd love to be the bearer of good tidings for once! - Anne

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Comments

You assume that these hospitals are closing for reasons other than fiscal mismanagement.

Fact is, the financial dealings of hospitals are opaque to scrutiny, especially the not for profits. There are countless examples of bad CEO's screwing up hospitals and blaming it on something else. Usually this involves building something...CEO's have an edifice complex, because they can put a building project on their resume for the next job...that makes no sense. Losing control of the billing and collection process is almost always found in such hospitals.

Want examples? Google hospitals in Gallup New Mexico and Ventura California to start.

The hospitals always like to plead poverty, and certainly some have good reason. My guess is that more hospitals close because of fiscal mismanagement than out of their control extrinsic forces.

GREED. PLAIN AND SIMPLE. MOST ESTABLISHED DOCTORS, MOST HIGH END EXECS - WELL THEY CAN LIVE ON A LITTLE LESS AND CHARGE A LITTLE LESS AND ALL AROUND MEDICAL EXPENSES WOULD REDUCE AND THE AVERAGE WORKING STIFF COULD SEE THEIR WAY TO PAYING THEM RATHER THAN THROWING UP THEIR HANDS AND GIVING UP. OUR MEDICAL SYSTEM IS NO LONGER BASED ON HEALING BUT ON MAKING MONEY. IN MY COLLEGE STUDENTS TALK ABOUT GOING INTO THE MEDICAL PROFESSION BECAUSE "IT IS GOOD MONEY". SO SAD - CAPITALISM HAS DESTROYED THE HEALING INDUSTRY.

There is more than enough blame to go around and the provider is only one component of the massive problem. Payers, who add a tremendous amount of cost, should be held accountable for a fair share of the blame as should physicians, big pharma and device companies as well as hospital leadership. Yes, many US hospitals are wildly inefficient, billing and collection processes are broken, basic business data, e.g., CDM, does not contain correct information in many cases, etc.

I guess I would like to hear someone talking about fixing the inefficiencies within the delivery system; nurses walking 6-8 miles per shift, no EMR or CPOE systems in place, product and med stock outs, physician self referral abuse, wildly different requirements and documentation from each payer, leaderships lack of understanding of their local market needs, etc.

Everyone seems to be overlooking the insurance companies, and the economy in general. Urban city hospitals are seeing a significant rise in their ED numbers because the uninsured are using these emergency rooms as replacements for standard primary physicians.

In addition, take the time to find out what insurance companies are beginning to limit as far as reimbursements for care in the hosptials. hospitals are beginning to be held to higher standards as far as the care given is concerned, but the insurance companies are squeezing them on all angles for reimbursements, which are unknown and never seen by the general public.

How are Operating room nurses affected by low numbers of elective cases? How can OR's decrease the bottom line short of lowering RN's salaries?

If medical professionals (both MDs and management) spent as much time working on business models that can succeed in the current environment as they do complaining about insurance and government payments they could fix their problems. No amount of whining will take us back to the good old days so if our present managment can't come up with a business plan that can succeed then maybe it's time to find folks that can!

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