April 24, 2024

2009 Industry Outlook

Healthcare 2009

In Need of an Rx: With costs continuing to rise and an increasing number of uninsured patients, Florida's hospitals are bracing for a tough year.

Amy Keller | 1/1/2009

Hospital revenue is declining as rising unemployment swells the ranks of Florida’s uninsured and paying patients delay knee replacements, tummy tucks and other elective surgeries that would normally help offset uncompensated care.

Shands Hospital
80-year-old Shands AGH in Gainesille, which serves a large percentage of the
city’s uninsured, will close this year.
[Photo:Shands AGH]

At the same time, an ongoing credit crunch and stock market declines are limiting hospitals’ fallback strategies. Bruce Rueben, president of the Florida Hospital Association, says bond-rating agencies such as Moody’s and Standard & Poor’s are “looking very carefully and with some anxiety at these huge state budget deficits.” The deficits have impaired hospitals’ ability to access capital. And with a plunging stock market, hospitals can’t rely on investment income to make up for slim or non-existent operating margins. “We would expect we’re going to see a tough 2009,” says Rueben.

Such pressures proved too much for Shands AGH in Gainesville, which will close in the fourth quarter. The 80-year-old hospital, which serves a significant percentage of the community’s uninsured population, lost more than $12 million in 2007 as federal and state funding was cut, reimbursements from government programs and private insurers declined and the number of patients dropped. “A poor financial outlook ahead and growing healthcare industry challenges have forced us to make this very difficult decision,” says Timothy Goldfarb, Shands HealthCare CEO.

2008 Healthcare Cost Increases
Metro Increase Costs per employee
Orlando 9.2% $7,573
Minneapolis 9.1 8,766
Detroit 7.5 8,374
Tampa Bay 7.1 8,331
Washington, D.C. 6.7 7,552
San Francisco 6.7 8,696
Chicago 3.7 8,147
Houston 2.6 8,740
Source: Hewitt Associates

Other hospitals, including Munroe Regional Medical Center in Ocala, have begun handing out pink slips. St. Vincent’s HealthCare in Jacksonville has gone through three rounds of layoffs since 2007. The healthcare system reported a 28% rise in uncompensated care in 2008, according to the Florida Times-Union.

Rueben says hospitals with enough paying patients can shift the rapidly rising costs of uninsured care to paying patients. Rural hospitals, he says, are in particular danger because they don’t have the patient base to spread costs.

Experts say that problems will plague Florida’s healthcare systems as the rolls of the uninsured grow, residents age and the cost of healthcare continues to climb: “People use terms like ‘death spiral.’ There’s an accuracy to that terminology,” says R. Paul Duncan, chairman and professor in the department of health services research at the University of Florida. “You have more and more patients for whom you have no reimbursement at all, or less, and you’re making it up from an ever-shrinking pool of paying patients.”

Michael Grimmé
“Healthcare financing is going to be a difficult challenge because it’s so complex and convoluted now. We need to find a way to get everyone access to health insurance and a way to pay for healthcare that results in getting us what we want in healthcare.”
— Bruce Rueben, president of the Florida Hospital Association

[Photo: Ray Stanyard]

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