So Far, So Bleak

Even with the program and administrative cuts and layoffs, seven in 10 hospitals reported a decline in overall financial health. Forty-three percent expected losses in the first quarter, up from 26% for the first quarter of 2008. Nearly every hospital reported that its capital situation had either not improved or deteriorated since December, while 80% of hospitals reported cutting capital spending for facilities upgrades, and clinical and information technology.

The problems in rural America are somewhat different, but just as dire. A new federal report titled Hard Times in the Heartland notes that cities have, on average, 72 physicians per 100,000 people, while rural areas have 55 and small rural areas have only 36 ("HealthLeaders Media Community & Rural Hospitals Weekly," May 6, 2009).

This is where hospitals big and small, urban and rural, find themselves in the first six months of 2009. What about the next six months?

Michael Sachs, president and CEO of Sg2, the Skokie, IL-based healthcare intelligence firm, says a down economy "shouldn't be a cause for despair." He says it's an excellent time to poach business from competitors, or acquire them. He expects resurgence in healthcare mergers in the months ahead ("HealthLeaders Media HR," April 27, 2009).

Michael Young, CEO of Atlanta's Grady Memorial Hospital, used the backdrop of recession as an opportunity to change the culture at the perennially troubled safety net ("HealthLeaders Media, Leadership," May 1, 2009).

Young told employees—and the news media—that the 140 layoffs he authorized, from groundskeepers to top physicians and managers, were as much about weeding out poor performers and improving the "Grady culture" as much as improving the bottom line in a poor economy.

Eventually, we are told, the nation will emerge from recession. At this writing, there were already some signs that the economy had turned a corner.

Sachs, Schwieters, and Young are on to something. In a recession, staff is more willing to make concessions and less interested in covering for the low performers; competitors are usually more vulnerable and less aggressive; and external economic woes make it easier to push for deep operational and cultural changes. That's true in any business, maybe even more so for hospitals.

Now that the myth of invulnerability has been buried, don't let this crisis go to waste.