Hospitals bleeding money?

Dirty money concept.For the second time this month, financial experts are predicting a tough year ahead for the non-profit hospital industry.  First, Standard & Poor’s rating services analyst said profit ratios will be down in 2013 (link here)  Now, Moody’s Investors Service is saying expenses outpaced revenue last year as patient revenue slipped by half a percent (found here).  What’s more, both reports say that efficiencies in hospital business were actualized last year and won’t produce any more savings in the future.  In other words, hospitals got lean and can’t get leaner.

Add to that the paralyzing fear many hospital CEOs are feeling over the effects of the Affordable Care Act, reduced payments from many insurance companies (such as Blue Cross/Blue Shield), and reduced government dollars for patients who are readmitted.  Combine them all, and it might seem that some hospital administrators are facing a vampire, a werewolf, and a mummy in a dark graveyard.

Well, maybe not.  As S&P’s analyst also reports, hospital revenue has been buoyed by their investment income.  Savings is paying what patients are not.  Moody’s also reports that revenue from patients is still up, not down.   Nobody’s growing broke, and hospitals keep seeing more and more patients.

Perhaps the best thermometer of hospital financial wellness was alluded to the Chief Health Care Officer of the Association of American Medical Colleges.  JoAnne Conroy, MD, asked if hospitals would just stop advertising (link here).   She cites the New York Times report that advertising by hospitals is 20 percent higher this year than in 2010.  Hospitals have spent more than $717 million in advertising just in the first half of 2013.  That’s a raise of 7 percent per year that hospitals gave to their ad firms, not their nurses.  Conroy estimates that each hospital spends between $1-$6 million each year in ads.   We know that some of those ads, including some Twin Cities billboards, are often written off as “charity care.”

This comes at a time when Minnesota hospitals have to start being more transparent and reporting their staffing levels to the state and to the consumer.   For those hospitals that maintain safe and effective staffing, that’s a great selling point, and it’s free.  In fact, if hospitals were to re-invest their marketing dollars into their programs, the results in patient outcomes would sell themselves.