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Pity the Poor Hospitals…

Posted by MDViews on December 27, 2008

Here is an article that generates in me anger and disgust.  Hospitals have fallen on hard times. This news report cites several hospital closings, cut backs, lay offs and building projects on hold. The article states reasons for this decline as 1) lower reimbursement by Medicare, Medicaid and insurers 2) more people with high deductible plans not paying their bills 3) higher borrowing costs on outstanding debt 4) less return on investments or negative return on investments and 5) higher expenses.

Hospitals are just like every other business in that they have to take in enough money to cover what they spend or they go broke and disappear–unless they are owned by the government (VA system or state or county or city hospitals) in which case they go on and on and just soak the taxpayers for more money.

But hospitals make so many business mistakes that their current plight is not at all a surprise.

Lower reimbursement: True. But reimbursement in my mind is still plenty good. In many areas of the country, Medicare and Medicaid are the best payors of patient services. What about insurance companies? Hospitals negotiate contracts with insurers and define exactly what each company will pay for a particular service. Say, one hospital day in a standard surgical floor may be $500. The insurance company wants to pay less, the hospital wants them to pay more. They reach an agreement. No one puts a gun to the hospital board’s head or the administrators head saying, “Sign this or I’ll splatter your brains on the paper.” (aka The Godfather) It is a voluntary contract. If the hospital cannot exist on what the negotiate rate is, DON’T SIGN! But they do. You, dear reader, may or may not know, that many of those high echelon administrators and board presidents and insurance company presidents are friends.

More bad debt: The article blames higher deductible health plans, and I admit, that may have some bearing on this. But I have been impressed through these 30+ years in health care of the general lack of understanding and ineptitude of hospitals at collections. I have heard story after story of inconsistent billing practices, unnecessary heavy handed tactics, lack of persistence when persistence is required and a general laissez-faire attitude about an activity upon which the very survival of the organization depends. (Then don’t know which side their bread is buttered on.) The waste is really unbelievable. I see it and hear about it (and have experienced it myself with my wife’s illness) at my hospital regularly.

Higher costs on outstanding debt: This is maddening. Why does a hospital go into debt in the first place? Do they really need the luxurious marble foyers, the latest architectural award, the expensive hardwoods, the landscaping and fountains? Do those come free? Hospitals waste money in building costs and maintenance, in ever newer machinery, in expensive (very expensive) computer systems that have not proven to be any safer than paper charts but cost more and decrease efficiency of the doctors and nurses, the only ones generating money, in higher and higher administrative costs, higher and higher union contract costs and the list could go on and on. Hospitals should build practical buildings, use only proven technology, trim top heavy administration, have a strike or two to weed out some union overpayment and save, save, save to cover capital expenditures.

Less return on investment: Return on investment depends on how greedy you are to start. Hospitals are a vital service and are frequent recipients of bequeaths and gifts. They have a responsibility to be conservative with their investments, not put all their eggs in the market.

Higher expenses: Most hospital expenses are wages and salaries for employees. Hospitals for which I have worked and in which I have practiced have had unions, very powerful unions. They basically have given the nursing union pretty much everything they have asked for, so much so that they cannot even have management nurses help out in a pinch if we get really busy or if too many nurses call in sick. They give away the farm every three years, then cry because they’re reimbursement is inadequate! They need tough negotiators and leadership not afraid to handle a strike. There are nurses who will cross picket lines.

So shame on hospitals for crying poverty. It is a problem of their own making.

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