South Florida Hospital News
Monday July 16, 2018
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January 2009 - Volume 5 - Issue 7

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Change is Coming – Challenges in Health Care

It’s now official – our economy has been in a recession period since the end of 2007. Recessions create many challenges in health care, and result in changes that have both short and long term consequences. During a recession, the major stressors on the health care industry include:
  • Less patients seeking preventive and elective care;
  • Less hospital admissions;
  • Rising unemployment leads to increasing amounts of patients without health care coverage and thus less reimbursement to all health care providers;
  • Higher unemployment and consumer fear results in less tax revenue for local and state governments – hampering their ability to expand access to care and compensate health care providers for their costs;
  • Reduced revenue and reimbursement causes health care providers to make cutbacks in services and postpone or make less investment in new equipment and technologies.
This time around, the credit crisis amplifies these problems. Providers have trouble getting financing to renovate, expand or replace equipment. Also, many providers rely on interest income from investments to provide some cash flow but this has virtually disappeared due to the market fluctuations.

Community Impact

Postponing health care due to lack of insurance or the ability to pay may result in people showing up with more severe conditions to their provider than they otherwise might have, further straining system resources. Health care industry cutbacks result in less employment in the community – and it is estimated that every $1 in salaries and wages paid results in $2 of economic activity in the community as those dollars change hands. So, the impacts multiply.

Health care is an important sector of our economy, providing over 40% of new jobs in the private sector in 2007.

The Numbers

A recent survey by Databank completed November 11th included 557 hospitals in 30 states. They are already feeling the pinch: 31% report a decline in elective procedures in the past 3 months, and 38% noted a decline in admissions. The economic downturn and credit crisis are impacting hospitals to the point that 56% are postponing renovations and expansions; 45% are postponing adding or replacing clinical equipment and 39% are postponing expenditures on information technology. These postponements will have a trickle-down effect on other segments of the economy.

A Way Out – Change We Can Believe In?

President-elect Obama has introduced his initial plan to strengthen the economy. It includes launching an effort to make all public buildings more energy-efficient to save the taxpayer millions and at the same time creating additional demand for more efficient energy products and renewable energies. The plan also includes a massive investment in our national infrastructure, which he says will create millions of jobs. Finally, his plan includes efforts to modernize and upgrade all school buildings across the country and to modernize the health care system to make sure every doctor and hospital is using cutting edge technology and electronic medical records to prevent mistakes and save money.

Specifically for health care, Obama’s plans include making a new public health plan available to individuals and small businesses, with no one excluded and no pre-existing condition clauses, with a subsidy by the federal government to pay the premium. He also plans to expand Medicare and S-CHIP, improve access to preventive care and disease management programs and lower drug costs through allowing drugs to be imported and the use of more generics. His plan indicates this will all be paid for by ending the Iraq war and increasing tax cuts on corporations and high income earners.

Will the changes be enough? Will they come soon enough? It will take time for the necessary legislation to be passed and implemented. The TARP (Troubled Asset Relief Program) will be critical to restoring credit markets, which will pave the way for the economy to regain its footing. As health care providers we must do our part through wise use of our resources until the changes are in place.

Anne Kennedy, Controller, Columbia Hospital, can be reached at Anne.Kennedy@HCAhealthcare.com.

References 1. American Hospital Association Survey of Hospitals, The Economic Crisis: Impact on Hospitals, includes data from 736 hospitals from October – Nov 10 2008
2. Databank Survey of 557 Hospitals July Sept 2007 and 2008 year-to-date as of November 11.
3. abcnews.com MoneyBeat article of 12/1/08 – Recession Hits One-Year Anniversary
4. http://origin.barackobama.com/issues/health care/
5. http://www.barackobama.com/pdf/issues/Health careFullPlan.pdf
6. http://www.barackobama.com/issues/economy/

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