Archive for Monday, November 24, 2008

Kansas hospitals brace for ill effects of sick economy

Lawrence Memorial Hospital is bracing for the ill effects of tough economic times. The hospital is anticipating little growth in the number of patients for next year.

November 24, 2008


Statewide, hospitals are bracing for the ill effects of the troubled economy.

These effects include:

• Providing more charity care as the numbers of those without insurance continue to grow. Without insurance, oftentimes patients put off preventative care and end up in emergency rooms.

The Kaiser Family Foundation did a survey that found for every 1 percent increase in the unemployment rate, there are another 1.6 million people uninsured.

• Seeing fewer patients with insurance because they are delaying elective treatments such as a hip replacement or weight-loss surgery. They feel insecure about the market and their jobs, so they delay the elective care, which tends to be the most lucrative for hospitals.

“Hospitals are definitely beginning to report lower admissions and lower elective procedures,” said Caroline Steinberg, vice president of trends and analysis for the American Hospital Association.

The AHA released a new report that surveyed 736 hospitals and included information from a Web-based reporting system used to track hospital trends. The report found 30 percent of hospitals are reporting a moderate to significant decline in patients seeking elective procedures and nearly 40 percent reported an overall drop in admissions.

A majority of the hospitals also noted an increase in the proportion of patients unable to pay for care. Uncompensated care was up 8 percent from July to September compared to a year earlier.

The report also found that the credit crunch is increasing the costs of borrowing money. Hospitals saw interest payments on borrowed funds increase by an average of 15 percent from July to September versus the same period last year.

“The capital crunch is making it more difficult and expensive for hospitals to finance their facility and their technology needs,” Steinberg said.

Shands HealthCare, a nonprofit Florida hospital system, cited the poor economy and low patient demand for closing one of its eight hospitals in Gainesville. The chief executive of the 367-bed hospital told The New York Times that the hospital lost $12 million last year.

Bad to worse

Steinberg said a fallout among hospitals will only worsen the economic situation.

Hospitals employ more than 5 million people and are the second largest private sector employer behind restaurants, Steinberg said. Every dollar spent by a hospital supports more than $2 of additional business activity in the community.

In Kansas, hospitals employ 65,000 people or 3.6 percent of all employees in the state, with a total payroll of about $3.4 billion, according to a recent research report.

“It’s an area that we need to be thinking about when we think about economic stimulus,” Steinberg said.

So far, Kansas seems to be weathering the economic storm better than other parts of the country.

“I think that in Kansas, we probably haven’t seen the extent that some other parts of the country have, partly because our banks in Kansas seem to be a little bit more solid,” said Tom Bell, president and CEO of Kansas Hospital Association.

While urban and rural Kansas hospitals aren’t reporting any fallout yet, he said they are concerned about the potential increase in the level of uninsured.

“We are very concerned about what we might see in the future,” Bell said.

KU doing well

At Kansas University Hospital, patient volume continues to set monthly records. Its inpatient volume for the first quarter of this year was 6,042, up 7.8 percent from the same period a year ago. Meanwhile its outpatient volume was up 10.4 percent.

“We are meeting budget expectations in terms of patient operations,” said Dennis McCulloch, KU Hospital spokesman.

The hospital’s operating income for the first quarter was $10.6 million, up from $10.1 million a year ago.

While KU hospital has less than 15 percent of its investments in the stock market, the hospital still took a big hit during the first quarter. Its net income was $444,000, down from $11.9 million a year ago.

“I don’t think anybody anticipated when we were budgeting in the spring that we would have such a collapse,” McCulloch said. “There’s not much more we can do.”

McCulloch said if the hospital needed to tighten its belt further to hold down costs, it would. But, it wouldn’t compromise patient care.

End of the year surge?

While many predict a patient decline, KU doctors speculate that there might be an end-of-the-year surge as people opt for care before severance packages are taken away or they are laid off.

LMH CEO and president Gene Meyer said typically there is an upswing at the end of the year because people have satisfied deductibles and want to get treatments in.

However, he said it was too soon to predict whether the upswing would come or how bad the economy would affect LMH.

Through October of this year, there have been 19,732 inpatients, compared to 19,864 last year. But in October alone, there were 1,726 inpatients, compared to 2,069 a year earlier.

For 2009, the hospital is predicting inpatient volume to have little growth. In out-patient growth, they are predicting some growth, but that’s because there has been a shift from inpatient care to outpatient care each year, Meyer said.

“We are taking an extremely conservative approach to our budgeting,” Meyer said.

LMH is not holding off on capital improvements, he said. The hospital will take a look at positions when they become open to see if they should fill them or not.

“We are going to weather this storm and fortunately from a standpoint of financial reserves and financial capabilities, we are in pretty good shape. But, we have to be careful as we go forward,” he said.

“I think a lot of people are obviously nervous and anxious about the economy and what their own personal situation looks like. I think, unfortunately, health and paying for health sometimes comes down the pecking order behind some necessary day-to-day activities.”


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