Monday, August 30, 2010

Is There A Future For Public Hospitals?

The current economic climate for hospitals has been described as Darwinian. I think this is a fair assessment considering the current level of performance for many small, rural, community hospitals. Many of these are public hospitals that were developed years ago to provide needed healthcare services to isolated communities.

A recent article in the Wall Street Journal has identified that their current bad credit ratings combined with the expected government cuts under healthcare reform, will further cripple public hospital's access to capital needed for health IT and other infrastructure needs. In other word, banks don't lend money to hospitals that really need it, particularly after the recent banking industry crisis.

Two other characteristics of public hospitals work against them as well. Most are small and stand alone. This gives them less of an edge when negotiating purchasing and managed care contracts when compared to the larger systems. As we move to adopting more "Centers of Excellence" again the stand alone public hospital will have a disadvantage. Finally, those hospitals that have been relying on tax subsidies by their local communities will face strong pressures to see these go away completely and have no prospect of any increases.

Some public hospitals have gone from public to private in the past with no problems. I oversaw one transformation in the early 90's. The move did nothing but benefit our hospital and the community. Perhaps more hospitals will be looking at this or even face a much more devastating alternative.

More on this later.

Mark Brodeur


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