Hospitals hurt by ailing markets
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It is not just heart monitors sounding red alerts in hospital corridors these days ”“ it is stock tickers as well.
Even as the federal government earmarked stimulus money to prop up New York”™s Medicaid program for the next three years, hospitals are suddenly grappling with drops in investment revenue they have long used to offset shortfalls from state Medicaid funding and other sources.
New York hospitals are operating at a margin of minus 2.2 percent, according to a March survey by the Healthcare Association of New York State and the Greater New York Hospital Association.
HANYS and GNYHA said 82 percent of survey respondents are scaling back capital projects in response. HANYS lobbied lawmakers this month to restore hospital and nursing-home access to financing from Industrial Development Agencies, after their eligibility for IDA tax-exempt loans expired in February.
“Balance sheets have been hit particularly hard, making it almost impossible for health-care providers to access the capital needed to invest in the latest technologies and improve facility infrastructure,” said Daniel Sisto, president of HANYS, in testimony to Albany legislators. “The credit and equity crisis further limits access to bonds, and uncertainty exists as to if and when the market will return to functional levels ”¦ In 2007, the collective bottom line margin of hospitals in New York state ranked second-worst in the nation, second only to Mississippi.”
Earlier this month, the federal government released funding to shore up state Medicaid funding, with Dutchess, Orange, Putnam, Rockland, Ulster and Westchester counties slated to receive more than $150 million over the next three years.
It was not immediately apparent the impact the funding will have on beleaguered hospital finances and operations. Slightly more than half the hospitals polled by HANYS have frozen hiring, and nearly a third have budgeted for layoffs. That latter group includes Westchester Medical Center, which eliminated 400 jobs, about 10 percent of its work force, and is closing the 110-bed Taylor Care Center nursing facility as it attempts to deal with revenue shortfalls. Gov. David Paterson”™s proposed budget would eliminate $31 million from the Valhalla hospital”™s budget, according to HANYS.
The willingness for people to seek treatment for non-vital medical procedures is one of the symptoms being tracked by health care analysts at Stamford, Conn.-based Thomson Reuters Corp., which recently conducted a poll suggesting half of U.S. hospitals are operating at a loss during the recession. A separate report by the American Hospital Association determined that hospitals nationally had a positive operating margin of 1.8 percent.
“The key metrics we”™re watching most closely right now are operating margins and frequency of elective procedures,” Gary Pickens, chief research officer for Thomson Reuters”™ health-care practice, said in a statement. “If they start to slip, it may usher in a host of contagion effects.”
The median hospital had 110 days of cash on hand, the lowest yet seen in the period that Thomson Reuters has conducted the survey. Thomson Reuters tracks two-dozen financial indicators at more than 400 hospitals of all sizes nationally, studying revenues, employment levels, patient volumes, reimbursement rates, and bottom lines.
“Hospitals are facing unprecedented economic stress and many of the indicators we”™re seeing suggest that things will get worse before they get better,” Pickens said. “While operating margins are generally holding steady, non-operating margins have all but disappeared from hospital balance sheets. That makes it difficult for hospitals to secure financing for new equipment and to fund expansion efforts.”