According to a study published this week in Health Affairs, the Great Recession did not have a permanent negative financial impact on vulnerable hospitals, such as safety net facilities, or those considered financially weak prior to the recession. However, this doesn’t mean these same hospitals will fare so well in the next few years, as they respond to industry challenges and Affordable Care Act (ACA) changes.
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Gloria Bazzoli, lead author of the study and Bon Secours professor of health administration at Virginia Commonwealth University in Richmond, Va., explained that while financially vulnerable hospitals recovered after the recession, they only recovered to their pre-recession, at-risk positions. Additionally, their recovery was fueled by increases in non-patient care revenues, while profitability in their main business of patient care continued to decline.
According to the report, of the 2,971 private hospitals studied, 24.6 percent were classified as financially weak before the recession, 13.4 percent were deemed as mixed, and 62 percent were designated as financially strong. Eleven percent of the total was made up of nonprofit safety net hospitals, and of that group, 27.9 percent were financially weak.
“Even though these hospitals took a hit during the recession, they seemed to have recovered by 2011. That was the good news,” said Bazzoli. “From that perspective, we were expecting the strong hospitals to hold their own and the weaker to get weaker. While the weaker hospitals did not get more weak, they are still in a fairly challenging state.”
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Bazzoli said U.S. hospitals generally experienced temporary reductions in total margins during the recession, but recovered. While this sounds like good news, she added that it is important to understand that financially weak hospitals will face unique challenges when they retool their organizations and rethink their markets as implementation of the ACA continues.
“The implications here are for policymakers,” said Bazzoli. “You can’t use one size fits all when you look at the hospital industry and when planning the way hospitals are reimbursed. It is important for policymakers to design payment policies so that they do not expose weak hospitals to substantial financial risk that ultimately may compromise patient care.”