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Hospitals feel squeeze of receding economy

A recent survey by the American Hospital Association (AHA) shows just how much the troubled economy is affecting the nation’s hospitals.

More than 30 percent of survey respondents report a moderate to significant decline in patients seeking elective procedures, and nearly 40 percent of respondents report a drop in admissions overall.

Additionally, uncompensated care was up eight percent from July to September versus the same period last year, according to the report.

The report finds that hospitals have seen the immediate impact of the economic downturn in other ways. Total margins fell to -1.6 percent in the third quarter of 2008, versus 6.1 percent during the same period last year. Hospitals rely on investment income, especially since government payors do not cover the costs of care. However, recent turmoil in the stock market has turned investment gains to losses, further worsening hospitals’ financial condition.

Factor in Medicare and Medicaid issues, and the financial stress is forcing hospitals to make or consider making cutbacks to weather the economic storm including cutting administrative costs (60 percent), reducing staff (53 percent) and reducing services (27), among the hospitals surveyed.

Mississippi’s hospitals are certainly not immune to recession, and are eyeing 2009 with caution. Can Mississippi hospitals expect a rise in emergency room traffic as people lose jobs and health insurance and use the emergency room as a clinic? Or will people forego treatment because they don’t have the money to pay?

Althea Crumpton, administrator of Magee General Hospital in Simpson County, said both could be expected. She, indeed, anticipates a rise in emergency room traffic, and at the same time anticipates a drop in other services as people delay or cancel treatment. And she foresees all of that causing collection problems.

Lance Moak, administrator of Franklin County Memorial Hospital in Meadville, which is licensed for 36 beds, 24 of them acute care, agreed.

“People who are already using the emergency room as a clinic will continue to do so,” he says. “People who don’t are going to forego treatment until their illness worsens, which will cost more to treat in the long run.”

Both Crumpton and Moak oversee rural hospitals located in counties where personal income is not high. Sam Cameron, president and CEO of the Mississippi Hospital Association (MHA), said earlier this year that the effects of a shaky economy could vary from hospital to hospital and region to region.

“A hospital in the Delta may see more of a problem than, say, a hospital in Northeast Mississippi,” he said.

Measures to combat the potential effects of a receding economy vary, as well. Some have more capacity to deal with a downturn than others.

At Magee General, which is the only hospital in Simpson County and serves residents of adjacent counties, as well, is allowing for a rise in collection problems in its budgetary process. Calling it “booking up bad debt,” Crumpton said, as the economic crisis built, the hospital forecast a rise of two percentage points in accounts receivable. She added that she is fairly confident that Magee General will not have to slash its staff or discontinue services in order to stay in out of the red.

Moak was not as optimistic. He said Franklin County Memorial, which operates a two-bed emergency room, is already thin in terms of staff. He said the hospital currently has the staff to meet the state’s minimum requirements. Any staff cuts would necessitate a discontinuance of service.

“I am extremely nervous,” Moak said.

The MHA points out that as hospitals go, so go their communities. An MHA study shows just how big a piece of the economic pie healthcare is. Hospitals alone generate a total impact of more than $9 billion on the state economy, and have on their payroll more than 50,000 full-time job equivalent employees.

In Mississippi communities, hospitals are some of the largest employers — 23 hospitals employ more than 500 workers.

Hospitals are also important “job creators” in their communities. Companies often consider access to quality healthcare when choosing a site to locate or expand, and the existence of a strong healthcare network can lower healthcare costs.

“As Mississippi’s leaders continue to ponder the state’s economic priorities and look for ways to create more jobs, they should keep in mind the importance of hospitals and healthcare to the state economy,” Cameron said. “This study shows that healthcare is much more to Mississippi than hospitals, clinics and doctors. The ripple effect of the healthcare sector throughout Mississippi’s economy is enormous.”

Contact MBJ staff writer Wally Northway at wally.northway@msbusiness.com.

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