More on Hospital Economics

On NPR's All Things Considered yesterday afternoon there was this story on one of the less well known effects of the economic crunch on not for profit hospitals. In essence, the credit crunch has seriously affected the ability of not for profit hospitals to issue bonds to raise money to expand facilities and services.

Hospitals see impact from this both directly and indirectly. Directly they see their inability to add or upgrade space, or to add new programs and equipment to better serve and to serve more patients. Because they operate on very slim margins (the "profits" available to keep up with growing needs and inflation), they can't do much expansion based on margin alone. In addition, while needs are growing, reimbursement is shrinking, both because Medicare and other insurers want to cut and because as more people lose jobs, more people come for care without insurance. As a result, margins disappear, and often plans and programs with them.

Indirectly, hospitals see impacts because it's harder to attract physicians or to negotiate with insurers as facilities age. This is part of what I wrote about in this earlier post. Physicians who want the best care for their patients, and employers and insurers who want the most effective resources for their clients (well, I still believe most of them do), want new facilities for their care. Even where that is not a big issue (and that's a rare circumstance), changes in building codes and patient safety regulations require updating and upgrading facilities - facilities that are often cheaper to replace than to repair.

To do either, not for profit institutions have to go for credit, primarily through the bond market. Difficulties there have these direct and indirect effects on the institutions, and so have direct and indirect effects on us and the care we receive.