Employment up, don't stop worrying
Hospital officials will take good news wherever they can find it these days.
But given the poor economic conditions that currently exist in the United States, you wouldn’t think employment data would be a balm to healthcare’s wounds.
For instance, in February, the federal Bureau of Labor Statistics revealed that the national unemployment rate rose from 7.6 percent to 8.1 percent, and the U.S. economy shed an additional 651,000 jobs. No comfort in those numbers.
The employment statistics for hospitals were not nearly so bad, however. In fact, employment at U.S. hospitals climbed 0.14 percent in February to a seasonally adjusted 4,719,300 people. T he number of employed was 131,800 more than in February 2008.
For those who still cling to the hope that healthcare is recession-proof, this is reassuring news. But don’t be fooled.
Hospitals around the United States are still cutting jobs, stalling capital projects and losing money.
In the last month we’ve seen Brookdale University Hospital and Medical Center in Brooklyn, N.Y., lay off 240 employees.Regional Medical Center in Memphis, Tenn., has cut 230 jobs. And Chicago’s Resurrection Healthcare, which lost $73 million in 2008, eliminated 125 positions and projects significant financial losses in 2009.
West Penn Allegheny Health System is one of the many large health systems that are hurting. The Pittsburgh-based system posted an operating loss of $9.1 million in the second quarter of 2009.
Christopher Olivia, MD, West Penn Allegheny’s president and CEO, says the nation’s poor economy has directly impacted the WPAHS revenue stream.
Olivia revealed that the health system experienced a greater than 20 percent increase in both charity care and uninsured discount charges for the first six months of fiscal 2009 compared to the previous year.
Rising unemployment rates in the markets served by hospitals also make it difficult for health systems to make money.
David Bachman, an analyst at Longbow Research, expects that the significant increase in unemployment in local markets may signal rising bad debt for hospitals throughout the remainder of 2009.
“We expect (bad debt, charity care and uncertainty about pricing and patient volume) to accelerate in the first half of 2009,” Bachman said.
Hospitals, like many other organizations in the current economy, are also worried about payment fraud.
A recent survey by the Association of Financial Professionals discovered that more than 70 percent of organizations surveyed experienced attempted or actual payment fraud in 2008.
Large organizations, like major health systems, were more likely to have experienced payment fraud than smaller ones.
Thirty percent of AFP survey respondents reported that incidents of fraud increased in 2008 compared to 2007, and nearly 40 percent experienced increased fraud activity during the second half of 2008.
And then there’s the Recovery Audit Contractor, or RAC, program, courtesy of the Centers for Medicare & Medicaid Services.
The RAC program rolls out nationwide on January 1, 2010, and hospitals had better be prepared, as RACs are “margin erasers,” says Bill Phillips, an adjunct professor of healthcare finance at George Washington University.
So, while hospital employment numbers may be up nationwide, the financial challenges that hospitals and health systems face are far from over.
