What's the Truth About Your Hospital's Financial Health?

HealthLeaders Media Staff, November 20, 2009

Only you know the truth about your hospital's health.

Hospitals are struggling or just fine, depending on whose study or survey methodology you believe. Within the past week, two respected organizations—the American Hospital Association and Thomson Reuters—have come out with a survey and a study, respectively, that seem diametrically opposed to each other's conclusions.

The AHA said hospitals are continuing to struggle financially while the Thomson Reuters report said hospital financials have recovered to pre-recession levels. So who's right? Well, they both are, but the challenge in finding a true fiscal health snapshot of an entire industry lies in the methodology.

I'm prepared to give the Thomson Reuters report a little more credence. It's based on proprietary and public data about hospital financial metrics, and goes so far as to say "the recovery has been broad-based, with all classes of hospitals—small, medium and large community hospitals, teaching hospitals and major teaching hospitals—showing positive median margins."

However, the AHA survey indicates that 34% of hospitals expect to report losses in the first half of 2009, up from 29% for the same period last year. I think the key here is the word "expect." While the AHA report focuses on subjective opinions, the Thomson report bases its conclusions on actual statistics.

The AHA report is based on a survey completed by 768 hospital CEOs, and the data was collected in August.

That doesn't mean the survey isn't valid or useful.

One shortcoming of the Thomson Reuters study, for instance, doesn't appear to take into account the ways hospitals achieved margins comparable to pre-recessionary times. The AHA survey said some hospitals have taken drastic steps to contain costs, indicating to me that many hospitals have cut their way back to pre-recessionary margins. To wit:

  • A higher proportion of patients are unable to pay for care and many hospitals are seeing more patients covered by Medicaid and other public programs for low-income populations.
  • More than half of the hospitals surveyed have reduced staff.
  • Eight in 10 have cut administrative expenses.
  • One in five have reduced services that communities depend on, including behavioral health, post acute care, clinic, patient education, and other services that require subsidies.

I'm not one to denigrate surveys—HealthLeaders Media does one ourselves each year that we're very proud of—but under these circumstances, I think I'll trust the financial data contained in one report versus the best-guess data contained in the other. Let's not forget, as well, that the AHA's job is to advocate for its members. In these volatile times, as healthcare reform bills seesaw the future projections of revenues for hospitals, it helps to paint as negative a picture as possible, without skewing the data. Also, a survey is self-selective, and depends on the truthfulness of its respondents, not to mention the fact that without comprehensive data, it's difficult to draw broad conclusions.

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