Hospitals Seeing Fewer Paying Patients Can Threaten the Amount of Charity Care Hospitals Can Provide
The New York Times reports that some hospitals say they are seeing fewer paying patients, even as greater numbers of people are showing up at emergency rooms unable to pay their bills. While the full effects of the downturn are likely to become more evident in coming months as more people lose their jobs and their insurance coverage, some hospitals say they are already experiencing a fall-off in patient admissions.
Some patients with insurance seem to be deferring treatments like knee replacements, hernia repairs and weight-loss surgeries — the kind of procedures that are among the most lucrative to hospitals. The possibility of putting off an expensive surgery or other major procedure has now become a frequent topic of conversation with patients. However, the loss of money-making procedures comes at a difficult time for hospitals because these treatments tend to subsidize the charity care and unpaid medical bills that are increasing as a result of the slow economy.
Many hospitals are responding quickly to a perceived change in their circumstances by laying off workers, consolidating facilities, and freezing construction and other capital spending. A September survey of 112 nonprofit hospitals by a Citi Investment Research analyst found that overall inpatient admissions were down 2 to 3% compared with a year earlier. About 62% of the hospitals in the survey reported flat or declining patient admissions.
While the drop-off in patient admissions may still seem relatively slight, hospital executives and consultants say it is already having a profound impact on many hospitals’ profitability. As fewer paying customers show up, there has been a steady increase in the demand for services by patients without insurance or other financial wherewithal, many of whom show up at hospital emergency rooms — which are legally obliged to treat them.
In California, for example, the amount of bad debt and charity care among hospitals has been steadily climbing, to $7.1 billion last year from about $5.8 billion in 2005.
The situation is exposing a main vulnerability of the nation’s hospital care system, which executives say relies heavily on private insurance to subsidize certain services. When there is a decline in profitable procedures paid for by private insurance, hospitals have less money to offset the relatively lower fees they receive from government insurance programs like Medicare and Medicaid.
“What happens in our country is that there’s really a hidden tax built in,” said Richard L. Gundling, an executive with a trade group for hospital financial executives, the Healthcare Financial Management Association. “Hospitals have to balance the mix of patients in order to survive.”
Another source of financial anxiety, hospitals say, is the continued difficulty in raising money through the credit markets. The majority of the nation’s hospitals are nonprofit, and they often raise capital through the municipal bond market to erect new buildings or make other significant capital investments. Because many hospitals say they are still unable to borrow easily, they have reacted by scaling back projects or holding off on major purchases.
Making matters worse for some hospitals has been a slowdown in bill payments, particularly by state Medicaid programs. Many hospital executives also expect outright reductions in payments by Medicaid and Medicare.
A healthcare consultant from Carl Marks & Company in New York predicts that many hospitals will soon start to reconsider the services they provide, with an eye toward scaling back or eliminating some altogether. Procedures that rely heavily on patients’ making sizable cash outlays, like bariatric surgery, are particularly vulnerable.
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