Recession hitting local hospitals

by Lesley Politi on December 17, 2008

Recession hitting local hospitals

Jacksonville Business Journal

A growing population of uninsured and underinsured heading to the emergency room with little or no ability to pay for their care is one of several alarming trends that health care officials say will make 2009 a challenging year.

It was top-of-mind among six executives from Jacksonville’s health care facilities, who discussed on Tuesday some of the headwinds they face as part of a Cornerstone luncheon at the Hyatt Regency. More than 600 area business leaders attended the Jacksonville Regional Chamber of Commerce industry-focused CEO summit.

The health care industry has a direct economic impact of $7 billion in Jacksonville, and a $21.7 billion direct impact in Northeast Florida including its related industries, according to the Center for Global Health and Medical Diplomacy at the University of North Florida. It also employs one in six Jacksonville residents, and is the fastest-growing segment of employment in the region.

But it is not insulated from the woes affecting the broader economy, as Hugh Greene, chief executive of Baptist Health, pointed out.

Throughout 2008, businesses with health coverage for their employees began chipping away at coverage and increasing deductibles to offset rising operating costs and a lagging economy. More employers dropped health insurance plans as the year progressed before eliminating jobs, too.

Douglas Baer, chief executive of Brooks Health System, said the deterioration of employer-based health insurance coverage is widening the gap between patients who can afford to pay for their care and those who can’t.

It has created a two-tier health care system — one level for those who have income and insurance to pay for health care services, another for those who don’t and access the emergency room as their primary care, said James Burkhart, president and administrator of Shands Jacksonville.

Burkhart said Shands has already seen a double-digit increase in self-pay and charity cases this year.

Shands in October announced plans to close its Gainesville hospital, Shands AGH, next fall in an effort to cut $65 million from the system’s budget. The family of eight hospitals anticipated budgetary shortfalls in the coming years, which is a likely scenario at hospitals across the country.

James Wood, chief executive of Memorial Health, said there were 200 more people accessing care at the emergency room in November than last year. Wood said he anticipates the trend will accelerate.

Memorial already sees a majority of patients — 63 percent — whose care is paid through Medicare or Medicaid, and another 5 percent completely unable to afford care. That leaves just under a third of patients who are covered by private insurance.

People who can afford health care are in some cases choosing to wait. Nationwide, 30 percent of hospitals are reporting a moderate to significant decline in patients seeking elective procedures, and nearly 40 percent say admissions overall have dropped, according to a November report from the American Hospital Association.

Meanwhile, nearly 100,000 more people enrolled in Medicaid this year than health officials expected, adding pressure to hospitals already shortchanged by low reimbursements through the government aid programs.

“We’re finding ourselves in a position of having to add beds when the number of people able to pay for those beds is declining,” Wood said.

And funding those projects may become more troublesome, as access to credit remains tight. Hospitals saw interest payments on borrowed funds increase by an average of 15 percent from July to September compared to the same year-ago period, according to the American Hospital Association.

The pressures have already had a significant impact on the bottom line. The American Hospital Association reported that hospitals have seen a margin decline to negative 1.6 percent in the third quarter compared to a positive 6.1 percent during the same prior-year period.

As a result, many hospitals are reconsidering or postponing investments in facilities or equipment, cutting administrative costs, and reducing staff.

“We need to be fiscally prudent to get through this time,” said Greene.


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