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So Far, So Bleak

John Commins, for HealthLeaders Magazine, June 11, 2009
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Halfway through recession-wracked 2009, a look at where we've been and where we're headed.

At least one sliver of consolation can be taken from the economic slowdown that has buckled the healthcare sector in the past several months: The cliché that hospitals are recession proof has been laid to rest. That myth lies buried under a pile of layoffs, wage and benefits cuts, ERs stuffed with uninsured and newly uninsured patients, a credit freeze, and tanking investment portfolios.

To anyone paying attention, it was not breaking news when a recent American Hospital Association (www.aha.org) survey of more than 1,000 members found that the woes that plagued the economy-at-large over the past 18 months finally seeped into the healthcare sector.

"We are being impacted like everybody else," says Chris Van Gorder, president and CEO of San Diego-based Scripps Health. "I wish I could say I'm surprised but I'm not. Hospitals and healthcare tend to get affected about six months after the general economy starts to sour" ("HealthLeaders Media Daily News & Analysis," April 27, 2009).

Halfway through 2009, the recession has been the biggest story of year for America's healthcare system. That's quite an accomplishment at a time when other big topics include President Obama's healthcare reform efforts, the billions of stimulus dollars for healthcare, and swine flu.

Nine in 10 hospitals in the AHA survey made cuts to address economic concerns. Nearly half have cut staff, while Bureau of Labor Statistics data show that hospital job growth has been flat in 2009.

Rather than knee-jerk staff reductions, however, some remember the old carpenter's axiom: Measure twice, cut once. Jill Schwieters, vice president at Pinstripe Inc., says the slow economy allows hospitals to look at pre-recession shift bonus incentives. "We are seeing people willing to work more, and you don't need to incentivize them with a bonus," she says. "You can get rid of those additional labor costs without impacting your people in another way" ("HealthLeaders Media HR," April 27, 2009).

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