Florida Trend | Florida's Business Authority

Healthcare 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]
Cutting Back
A recent poll by the Kaiser Family Foundation found that 47% of Americans report someone in their family is skipping medication or postponing or cutting back on medical care because of the costs.

April 2008 Oct. 2008
Putting off or postponing getting needed healthcare 29%
Skipped a recommended medical test or treatment 24% 31%
Didn’t fill a prescription 23% 27%
Cut pills or skipped doses of medication
19% 22%
Had problems getting mental healthcare 8% 12%
Did any of the above 42% 47%
Source: Kaiser Health Tracking Poll (Oct. 8-13, 2008)
The FHA’s Rueben believes the state needs to look at new ways to restore “more robust” funding for healthcare and says state lawmakers should consider increasing the tax on cigarettes to subsidize medical costs. “We have one of the lowest taxes on cigarettes in the country. Tobacco use drives the demand.”

As for a federal solution, Duncan isn’t holding his breath. “It’s clear the president-elect is worried about health insurance. His approach is to buttress the employer-based system. What will happen in the short term given the economic situation and short-term priorities is anybody’s guess.”

Insurance Stores

As more Floridians fall off the employer-based insurance rolls, BlueCross and BlueShield of Florida is providing more avenues to scout for health coverage. While the company still sells the vast majority of its policies through agents, 13% of new policyholders sign up over the internet. In addition, a growing number of customers are picking out plans at two “Florida Blue” retail stores — in St. John’s Town Center in Jacksonville and Pembroke Lakes Square Shopping Center in Pembroke Pines. Craig Thomas, BCBSF’s marketing vice president, says the consumer satisfaction level for customers who visit Florida Blue’s retail outlets is about 90% to 95% — “which is very impressive — probably unheard of from a customer experience standpoint” — and the company plans to open more locations this year.

Nemours Boost

Bright SpotsNemours, one the nation’s largest pediatric health systems, will break ground next month on its children’s hospital in Orlando. While the hospital won’t open until the third quarter of 2012, it’s already having an impact on the region. An economic impact study by the Milken Institute predicts that Nemours Children’s Hospital will create 5,082 jobs during construction and add $50 million to Orlando’s regional wage income in the first year and $81 million after five years.