AS FORTUNES sour on both Wall Street and Main Street, many observers of the U.S. healthcare industry are waiting to see how badly a weakening economy will impact hospitals.
“I’m pretty pessimistic about 2009, and hospitals may struggle well into 2010,” said David Bachman, senior research analyst for healthcare facilities at Longbow Research. “Some hospitals may be required to cut back on staffing, equipment, marketing and other areas next year, and they will be at a competitive disadvantage even when the economic climate changes for the better.”
Bachman said it will be more difficult – and more expensive – for hospitals to obtain credit for capital spending and investment. He predicted that while hospitals will find it harder to obtain funding to invest in capital improvement, they will be reluctant to cut back on such spending, as competition among hospitals is so fierce.
Reimbursement rates could also take a big hit, according to Francine Machisko, senior principal at the Noblis Center for Health Innovation.
“As the economy continues to slow, tax receipts will decrease at both the federal and state levels,” she said. “This will be hard on hospitals, because every state will have to address Medicaid reimbursement as their tax income declines. Every state will have issues, but some will be hit harder than others.”
Machisko predicted that hospitals in California and Florida could be among the hardest hit. Bachman agreed that Florida will be among the weaker climates for hospitals, especially in terms of patient volumes.
“Florida is a competitive hospital market, specifically south Florida,” he said. “As the housing market worsens and more jobs are lost, hospital patient volumes have declined. And temporary nurse staffing companies say Florida is as weak as they have seen it in years.”
Bachman said safety net hospitals in large urban areas, like Detroit and Los Angeles, are also struggling, as they are treating a disproportionate number of uninsured patients.
Hospitals nationwide are seeing fewer patients because people are putting off discretionary healthcare expenditures. Non-essential surgeries, laboratory tests and prescription refills are all down, said Machisko.
Lisa Martin, a senior vice president on Moody’s healthcare ratings team, says patients can’t bear the costs of healthcare in a deteriorating economy.
“As the economy weakens, companies are either eliminating their healthcare plan or are shifting costs in the form of higher deductibles or higher co-pays for employees,” she said. “In some cases, patients are not able to pay.”
In order to survive the economic downturn, Bachman said hospital administrators should try to operate even more efficiently, a common mantra in recent years.
“You’ll see hospitals running very lean on staffing and de-emphasizing services that are duplicated elsewhere in the community,” he said.