Hospitals Rebound from Dismal 2008

Pickens says hospitals have also lowered or at least stabilized drug expenses, and slowed the rate of increase for overall supplies expenses. "They have been able to keep those costs close to zero. It had been running 4% to 5% increases every year since 2005 when we began tracking this stuff in detail," he says.

Despite what appears to be a noteworthy turn-around, Pickens says there are still icebergs ahead. "We have to keep an eye on the really high unemployment rate and that looks like it hasn't peaked out yet," he says. "We've seen that there are increasing numbers of inpatient and outpatient services being paid for by government-sponsored rather than private insurance. The impact that could have on hospital payments is something we really need to keep an eye on."

Pickens says the Bureau of Labor Statistics' Hospital Producer Price Index also clearly shows that Medicaid reimbursement are going down in absolute numbers as cash-strapped states look for ways to cut expenditures.

"Hospitals have to continue to focus on the source of payment, especially if something looking like a public option emerges, or even worse, if things are allowed to continue as is and more people end up either uninsured or in the Medicaid/SCHIP extension rolls," he says.