HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, November 7, 2008

Hospitals See Drop in Paying Patients

The New York Times reports that in another sign of the economy’s toll on the nation’s health care system, 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.  Reed Abelson writes,

Stethescope_7While 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. Just as consumers are hesitant to make any sort of big financial decision right now, some patients may feel too financially insecure to take time off work or spend what could be thousands of dollars in out-of-pocket expenses for elective treatments.

The possibility of putting off an expensive surgery or other major procedure has now become a frequent topic of conversation with patients, said Dr. Ted Epperly, a family practice doctor in Boise, Idaho, who also serves as president of the American Academy of Family Physicians. For some patients, he said, it is a matter of choosing between such fundamental needs as food and gas and their medical care. “They wait,” he said.

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.

“The numbers are down in the past month, there’s no question about it,” said Dr. Richard Friedman, a surgeon at Beth Israel Medical Center in New York, although he said it said it was too early to call the decline a trend.

But many hospitals are responding quickly to a perceived change in their circumstances. Shands HealthCare, a nonprofit Florida hospital system, cited the poor economy and lower patient demand when it announced last month that it would shutter one of its eight hospitals and move patients and staff to its nearby facilities.

The 367-bed hospital that is closing, in Gainesville, lost $12 million last year, said Timothy Goldfarb, the system’s chief executive. “We cannot carry it anymore,” he said.

Some other hospitals, while saying they have not yet seen actual declines in patient admissions, have tried to curb costs by cutting jobs in recent weeks in anticipation of harder times. That includes prominent institutions like Massachusetts General in Boston and the University of Pittsburgh Medical Center, as well as smaller systems like Sunrise Health in Las Vegas.

“It’s safe to say hospitals are no longer recession-proof,” said David A. Rock, a health care consultant in New York.

A September survey of 112 nonprofit hospitals by a Citi Investment Research analyst, Gary Taylor, found that overall inpatient admissions were down 2 to 3 percent compared with a year earlier. About 62 percent of the hospitals in the survey reported flat or declining patient admissions.

Separately, HCA, the Nashville chain that operates about 160 for-profit hospitals around the country, reported flat admissions for the three months ended Sept. 30 compared with the period a year earlier, and a slight decline in inpatient surgeries.

Many people are probably going to the hospital only when they absolutely need to. “The only way they are going to tap the health care system is through the emergency room,” Mr. Taylor said.

And now, as the economy has slid more steeply toward recession in recent weeks, patient admissions seem to have declined even more sharply, some hospital industry experts say. “What we have not seen through midyear this year is the dramatic slowdown in volume we’re seeing right now,” said Scot Latimer, a consultant with Kurt Salmon Associates, which works closely with nonprofit hospitals.

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.

“It’s disproportionately affecting the bottom line,” Mr. Latimer said.

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