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Hospitals Facing Economic Challenges
By: Christine Whitmarsh

President Obama addressed America’s mounting healthcare crisis in his recent inaugural speech, stating, “Our healthcare is too costly.” Hospitals across the country know this all too well. They are surely anxious to see how Mr. Obama’s actions as president will match up with his campaign promises of affordable healthcare access for every American.

Here in Southern California, the reality of increasingly expensive healthcare during an economic recession reaping heavy job losses, is hitting home for local hospitals more than ever before. Economic concerns over the state of healthcare in California recently prompted the California Hospital Association (CHA) to release a special report detailing the impact of the national recession on California’s community hospitals.    The CHA report reveals the details of a November 2008 survey of California hospital Chief Financial Officers (CFOs). One of the key findings is a 73 percent increase in hospital consumers who are finding it difficult to keep up with rising out-of-pocket healthcare costs. Consumers lacking healthcare coverage are feeling the strain – and their numbers are growing. The survey showed a 33 percent increase in uninsured patients visiting the emergency room. The CFOs interviewed also reported a 30 percent drop in elective procedures, one of the areas with the greatest potential for financial growth in the state.

Much of this data is related to healthcare consumers losing their jobs and thus their health insurance coverage. Economists recently revealed that 598,000 American jobs were lost in January, raising the national unemployment rate to 7.6%, the most alarming numbers seen since 1974.

“As more people lose their jobs in this declining economy, they also are losing their job based health insurance,” said CHA’s President and CEO C. Duane Dauner. “The growing number of uninsured patients, coupled with inadequate Medi-Cal payments and the ripple effects of the financial market crisis, is leading to a decline in the financial health of California’s hospitals at the very time when demand for health care services is growing.”

The economic recession and inadequate Medicaid (Medi-Cal) reimbursement payments place California last in the nation when it comes to healthcare funding for Medicaid patients. In addition 41 percent of California hospitals have put the brakes on construction projects or equipment purchases due to frozen credit issues.

“It’s clear from the survey results that the economic challenges facing all Americans are also affecting the hospitals who provide care to us when we are sick or injured,” Dauner said. “When our hospitals are at risk, we are all in danger.”

Business Life spoke with CFOs at several local hospitals to learn how the economic downturn has affected hospitals in our area. Overall, the CFOs report that they are managing the controllable aspects of the situation, they emphasized that patient care is not being compromised and some even reported experiencing a recent growth pattern.

Glendale Adventist Medical Center
Kelly Turner, Chief Financial Officer

Overall: “We are seeing the impacts on our population base in terms of a shift in payers responsible for patients, with a slight increase in uninsured patients.”

Shrinking or Growing: “We’re in a growth pattern right now, with strong growth on the acute side of the facility (34 beds added). We have had an opportunity to improve our productivity, particularly in support and service departments. We’ve been able to increase staffing, efficiency and achieve gains in those areas based on growth.”

The only reduction Turner reports, is of 24 beds in his facility’s subacute care area. However he states that this is not a big concern, since those services are already provided by local area subacute and nursing facilities.

“There is a lot of volatility in the economy and it’s hard to say how that will play out.”

Verdugo Hills Hospital
Len LaBella, Chief Executive Officer

Overall: “Our main challenge is access to capital and credit. If we’re going to take on new projects or expand services there’s always a need for financing to do that. We’re exercising a status quo strategy at the moment.”

Decrease in Elective Procedures: “We have not seen a decrease in elective procedures, however what we have seen is a decrease in necessary patient surgeries and procedures. Our physicians are reporting that patients are foregoing needed surgeries because they don’t want to take the chance of being out of work for an extended period of time. They will delay a surgery because right now with the job market the way it is, it’s a wait and see situation.”

“People in healthcare are special. In a crisis situation like this, healthcare people do what’s needed, stay focused on taking care of each other and patients, and rally around what they need to do.”

Glendale Memorial Hospital
Amy Stricker, Manager of Marketing & Communications

Overall: “In light of the current economic climate, we are focused on what we can control; providing Glendale/Burbank area patients with the best quality care, compassionate service and consistently looking for ways to reduce costs, increase efficiency and add value.”

Reduction in Patient Care Services: “We eliminated two services in October, including our Behavioral Health Services and our Women’s Outpatient Clinic. These services were closed as expected reimbursement was insufficient to meet unit operating costs.”

“We continue to educate community members on tips to stay healthy. Community education and prevention are an important part of our mission. Preventive healthcare including regular checkups with a primary care physician may avoid or reduce the likelihood of a more serious illness.” ”

Providence Health & Services
Dave Mass, Chief Financial Officer

Overall: “The challenges all hospitals are facing are multi-faceted. MediCal and Medicare reimbursements are not covering actual costs, and patient admissions have declined at some Providence facilities. Also, as employers face budget constraints, they’re providing insurance with higher deductibles that some of their employees can’t afford.”     

Departmental Challenges: “Our emergency departments have seen more volume than expected.  We’re seeing less volume (a greater impact) in departments where procedures can be delayed or not done.”

“Consumers are holding back on spending money right now, and that translates to health care.”