Tuesday, August 31, 2010

Local governments look to shed public hospitals to save money

As local governments across the country look to trim their budgets, many are leaving the public hospital business. "More than a fifth of the nation's 5,000 hospitals are owned by governments and many are drowning in debt caused by rising health-care costs, a spike in uninsured patients, cuts in Medicare and Medicaid and payments on construction bonds sold in fatter times," Suzanne Sataline of The Wall Street Journal reports. "Because most public hospitals tend to be solo operations, they don't enjoy the economies of scale, or more generous insurance contracts, which bolster revenue at many larger nonprofit and for-profit systems." Many public hospitals, including several of the Journal's examples, are rural.

The bill for those small hospitals is expected to go up in the spring when the health care overhaul, which requires investment in technology, quality accounting and care coordination, goes into effect. "Moody's Investors Service said in April that many standalone hospitals won't have the resources to invest in information technology or manage bundled payments well," Sataline writes. "Many nonprofits have bad credit ratings and in a tight credit market cannot borrow money, either. Meantime, the federal government is expected to cut aid to hospitals."

"Sales and mergers of public hospitals are hard to quantify; the country had 16 fewer government-owned hospitals in 2008 than 2003, says the American Hospital Association, the result of sales, closings or transfers," Sataline writes. Chip Kahn, president and CEO of the private hospital trade group Federation of American Hospitals, told Sataline that private groups tend to run operations more efficiently, while adding capital. "Still, skeptics worry that in the hunt for healthy returns, the for-profits will kill expensive programs and close hospitals with poor revenue," Sataline writes. "Residents in many towns have fretted over the blow to their civic pride and the loss of their history." (Read more)

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