More than half of U.S. hospitals are "teetering on the brink of insolvency" or have become insolvent because they do not treat an adequate number of patients to provide sufficient revenue, according to a study recently released by Alvarez & Marsal, the Wall Street Journal reports.
For the study, researchers examined the finances of 3,861 of the 4,900 short-term, acute-care hospitals nationwide and found that 2,044 of the facilities do not make a profit from the treatment of patients. In addition, 744 of the hospitals that do make a profit from the treatment of patients lack adequate funds to make improvements or finance daily operations, according to the study. The study also found that capital expenses for the hospitals are underfunded by $10 billion to $20 billion because the facilities have used those funds to finance daily operations.
George Pillari, a managing director of the health care group at Alvarez & Marsal, said, "We're seeing hospital insolvencies and hospital bankruptcies -- it's the heyday right now," adding, "We're going to see continued insolvencies; we're going to see more bankruptcies this year than last year." According to Pillari, about 500 to 1,000 "top tier" hospitals nationwide make a profit on a regular basis, have excellent credit ratings and hold a substantial share of the market, and "then there's everybody else." He said, "Hospitals can make it. They can get by even if they're insolvent," adding, "But there's not much of a future unless the capital structure is fixed."
Hospitals face a number of problems, such as increased health care costs, decreased Medicare and Medicaid reimbursement rates, and an increased number of uninsured and underinsured patients, according to Gerald Gline, a bankruptcy attorney at Cole, Schotz, Meisel, Forman & Leonard. In addition, he said that many hospitals do not treat an adequate number of patients and face competition from same-day surgery centers and outpatient clinics. Gline added, "There are just too many hospitals" (Palank, Wall Street Journal, 4/30).
The study is available online (.pdf).
SOTT
SIGNS
OF THE
TIMES
OF THE
TIMES
Welcome to Sott.net
The World for People who Think
I worked in 3 different hospitals over about 20 years. What I observed (from the working grunt level) was the same pattern of administrative behavior that has brought financial trouble to other big corporations -- perhaps best summed up as greed.
Decisions were frequently short-sighted and designed to make things "look good" rather than work well. Money went into really silly projects rather than needed infrastructure and resources for the grunts trying to do more and more on less and less. Despite constant cutbacks on labor, administration always seemed to grow bigger and bigger.
Trying to talk fiscal responsibility and common sense to the decision makers just got you marked as a trouble-maker.
I would think it was perhaps only me, or an isolated incident but I saw it in all the hospitals, and heard similar stories from other hospitals. -- and begin to read about the same things happening in other US corporations.