As the New Year dawns I, like many Americans, am afraid.
Over the past year we’ve experienced a global financial meltdown, a deepening recession, rampant home foreclosures, Humpty Dumpty-like nest eggs, and the once-proud American auto industry gasping for breath. All of this is balanced against the hope that springs from the election of the first black President, who promises “change we can believe in.”
Hospitals are in growing financial straits and those in charge are deeply concerned, if not downright scared. In some ways, this is hard to imagine. Most hospitals reported outstanding, if not record, profits for the 2007 and 2008 fiscal years. However, change is afoot. Hospital admissions are down at nearly a third of hospitals, with a similar number of hospitals reporting declines in lucrative elective procedures. Additionally, recession-induced layoffs have resulted in a sharp rise in the proportion of uncompensated care that, when coupled with mushrooming debt and tighter credit, is propelling many hospitals into the red.
As a result, Moody’s, the credit-rating giant, has reported a rash of hospital credit downgrades. In October and November alone, Moody’s downgraded 18 hospitals and upgraded only one. At the same time, Fitch, another credit agency, downgraded the entire hospital sector from “stable” to “negative.” Although the subject of credit downgrades is somewhat abstract for many practicing physicians, the upshot is that it will be more expensive to finance hospital debt.
Coming on the heels of the largest hospital-building boom in American history, billions of dollars of debt present a very thorny fiscal rose. When this coalesces with less hospital utilization, more nonpaying patients, and potential decreases in federal reimbursement, it represents a financial crunch of catastrophic proportions.
Thus, it is no surprise our hospital administrators are on edge.
Enter me, the director of a money-losing service line, into an executive-filled room to propose expansion of hospital support for my hospitalist program. With average hospital support running a tad under $100,000 per hospitalist nationally, and overall support of about a million dollars per hospitalist group a year, any request for expansion will be scrutinized with a jaundiced eye.
In my experience, growing our hospitalist group was welcomed when the hospital’s coffers were bulging, the ED was overcrowded, and hospital beds were expanding. Granted, we had robust data showing our presence cut the average length of stay, increased throughput, and improved patient satisfaction—in other words, we paid for ourselves through enhanced efficiencies and cost savings. Still, the current economic realities dictate an unprecedented level of cost-consciousness and fiscal diligence. The result is my negotiations with my hospital administration have intensified, with an increased examination of expansion proposals, infrastructure development, and salary support.
So what are we—or I, in this case—to do? As I look at the potential of a prolonged recession, I am convinced this situation offers us a profound opportunity. Let’s face it: The hospital medicine boom was born out of opportunity. Early hospitalists took advantage of the opportunity to staff unassigned patients in the ED, backfill the migration of primary care doctors out of the hospital, enhance DRG reimbursements, reduce length of stay, and improve patient, staff, and subspecialist satisfaction because of our ability and willingness to staff inpatients around the clock.
In the coming years, we will again be offered opportunities, although they likely will come disguised as challenges. Some will choose to ignore these challenges in the hope they just go away, preferring instead to fear the unknown. Others will turn this fear into action and prosper. Opportunities will center on our ability to enhance patient outcomes and experiences. As federal dollars dry up and more and more Americans become uninsured or underinsured, hospitals will be pushed to augment the level of service and care they provide.