Aspinwall, PA, the leafy, affluent borough northeast of Pittsburgh, was formed more than 125 years ago as a neighborhood for wealthy families looking to escape the sooty smokestacks of the Steel City. Now, the tiny borough of 3,000 souls has a new problem with unwanted smoke, and the source of that problem is the University of Pittsburgh Medical Center Saint Margaret.

Thanks to a year-old, campus-wide ban on tobacco, Saint Margaret patients, visitors, and employees troop down the 200 yards from the main door to the residential side streets at all hours of the day to light up, leaving the manicured lawns of nearby residents looking like ashtrays.

"It's causing a very bad problem," Aspinwall borough manager Ed Warchol says. "These are nice houses and the homeowners are coming home and finding three or four people on their front lawn smoking cigarettes. They're telling people not to toss their cigarette butts down and they're getting rude responses.

"They've got people over there smoking in wheelchairs and hospital gowns with IV poles. We saw a guy out there smoking who had a quarantine outfit going from his neck down. A doctor told me that that light-brown suit means that guy's body is rejecting every antibiotic for the disease he has, and he's out there smoking!"

The borough last week asked Saint Margaret to create a designated smoking area on its campus. The hospital said no.

Doug Harrison, the hospital's executive of operations, told the Pittsburgh Post-Gazette that Saint Margaret wouldn't budge on the ban. "We are a health center, and we are here to promote health for all people," Harrison said. "Being smoke-free is extremely important."

Harrison told the newspaper that Saint Margaret would spend the next month looking for a solution but he didn't provide details.

In the meantime, the neighbors around the hospital are making noises. They've made videotapes of the cigarette smokers, and they've collected plastic bags full butts, empty lighters, empty cigarette packages, and other discarded smoking paraphernalia to show to the hospital, the town, and the media. They've posted large signs on their front lawns stating "UPMC Hear This! Aspinwall is not your ashtray! Stop exporting your habitual smokers." They even have a Web site that details their problems with litterers and loiterers and their efforts to pick up after them.

The neighbors considered filing a public nuisance suit against the hospital, but that effort stalled because the four attorneys they've attempted to hire-including the borough solicitor-declined because they already represent Saint Margaret in some capacity.

Warchol says he thought about sending the police down to ticket the smokers, but decided the idea was too expensive and time-consuming. "I'd have to send them down there five or six times a day." Besides, he said, it would penalize the smokers for obeying the hospital's policies. As a snuff dipper himself, Warchol says he sympathizes with his fellow nicotine slaves.

Nobody thought much about it last year when UPMC banned smoking on all campuses of its 20 hospitals. After all, UPMC was just doing what scores of other hospital systems were in the midst of doing, and what most other industries had done years before.

It turns out, however, that UPMC's system-wide smoking ban has become a case study in the law of unintended consequences. In most respects, the health system's stand against smoking is commendable. Cigarettes have killed more people than Stalin. But by foisting its smoking problem on others, Saint Margaret is presenting itself as intransigent, selfish, and uncaring in its refusal to provide relief for nearby homeowners, who are not unreasonably asking the hospital to be a good neighbor.

I'm getting a steady stream of bad tidings across my e-mail account lately concerning the growing headwinds facing hospitals in these United States. You might rightly wonder where these analysts have been the past few years as hospitals have struggled with growing bad debt expense and pressure from the uninsured, but I think a general good feeling existed because hospitals had historically easy access to capital in the run-up to the credit crisis, masking some of the operational challenges coming down the pike—such as consumer-directed healthcare, which is now magnifying the collection woes hospitals once blamed on the uninsured.

It's a tough market to stay ahead of, analysis-wise. On the one hand, healthcare in general—and hospitals in particular—are dealing with some of the same headwinds the rest of us are facing. Higher gas prices, inflation, rising wage pressures. Conflicting headlines render the financial future of healthcare uncertain. With the lack of a clear financial direction for the industry as a whole, I thought it might be helpful to check some of the recent headlines, good and bad, and what they portend for the healthcare industry.

Numbers of the uninsured are dropping

The U.S. Census Bureau says the number of uninsured are dropping, from approximately 47 million in 2006 to an estimated 45.7 million in 2007, which represents a decline from 15.8% uninsured in 2007 to 15.3% in 2008. Many sources I talk to don't really believe those numbers are accurate, but as long as the survey methodology doesn't change, the data can effectively show trends, and a half-percent drop in the uninsured is nothing to sneeze at.

Effect: Positive

Pressures mounting on hospitals

Moody's Investors Service sent out a report a couple weeks back that sounded an alarm for operating pressures on hospitals. Based on audited 2007 financial statements for 410 free-standing hospitals, those pressures are resulting in a slower revenue growth rate. Further, revenue is growing slower than expenses. According to the report, median annual expense growth declined to 7.4% in FY 2007 from 7.8% in FY 2006, while the median operating revenue growth rate decreased to 7.2% in FY 2007 from 7.3% in FY 2006. The positive kernel to be taken from the report, though, is that hospitals are reducing their expense growth far faster than the revenue growth rate.

Effect: Negative

Credit quality slipping

Another major rating agency sees dark clouds on the horizon for hospitals as financial metrics for the hospitals they rate have declined in recent months. "We expect the number of downgrades to exceed upgrades for the rest of 2008 and probably in 2009, as business and financial challenges squeeze operating margins and weaken balance sheets," Standard & Poor's credit analyst Martin Arrick says. However, even that report doesn't paint a clear picture, as Arrick expects a rich-get-richer trend to intensify in nonprofit healthcare. The stronger credits are doing quite well, while smaller and already lower-rated credits are struggling more mightily.

Effect: Negative

So take these sometimes-conflicting pieces of news for the picture they paint—a broad, macro view of the state of the healthcare industry. Of course, your experience in your own market may be much different. That's where the devil is in the details when you're trying to analyze the health of the industry, as I am. I'd love to hear your individual challenges or success stories, so please don't hesitate to contact me. Who knows, I might even write a story about it.

P.S. Be sure to check out our Top Leadership Teams event coming up this October in Chicago. I know travel is getting expensive, but if you only go to one event this year, this is the one, and I’m not just saying that because HealthLeaders signs my paycheck every two weeks. We’ve got a two-day agenda packed with some of the top leaders in healthcare today, and they’ll be revealing their operational secrets in a series of panels over the course of the conference. Compare this lineup with any of the shows that feature vendors yammering at you to buy their products, and I think you’ll agree with me. 

Michigan hospitals spent an unprecedented $2.6 billion in 2007 providing free and discounted care, writing off uncollected patient debts, and making up for losses from Medicare, Medicaid, and other government programs. The figures, to be released by the Michigan Health & Hospital Association, continue rising this year, underscoring the growing call nationwide for health reform, industry leaders say.

Two dozen outpatient clinics are to open at the new Los Angeles County-USC Medical Center, part of a decades-long effort to replace the hospital. The opening is the first step in a series of gradual moves into the new $1.02-billion facility, which covers 1.5 million square feet over the length of three city blocks and whose highest tower is eight stories.