cooldreams

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im not in med school yet, and work as an electrical engineer doing design on some hospitals. i had a rep come in today to talk about a security system, and he went on about how some of the seminars he has gone to said that about 90% of hospitals today are losing money. have any of you heard anything similar? that is actually scary if that is true. could mean the very infrastructure of usa medicine is on the verge of colapsing. but if this is true why has there recently been such a huge influx of hospital work... something doesnt quite add up... hmmm
 

RPalmerDO

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cooldreams said:
im not in med school yet, and work as an electrical engineer doing design on some hospitals. i had a rep come in today to talk about a security system, and he went on about how some of the seminars he has gone to said that about 90% of hospitals today are losing money. have any of you heard anything similar? that is actually scary if that is true. could mean the very infrastructure of usa medicine is on the verge of colapsing. but if this is true why has there recently been such a huge influx of hospital work... something doesnt quite add up... hmmm
I have spent the last five years as a healthcare analyst. Yes, it is very true that many (not all) hospitals are losing money. The hospital industry is extremely difficult. The problem is two fold.

First, reimbursement from Medicare, Medicaid, and third party payors is ever changing. In many cases, Medicare and Medicaid pays the hospital a fixed amount depending on procedure (I'm sure you've heard of reimbursement codes, "DRG's" or "APC's"). Often, this amount does not exceed or equal the costs that the hospital incurred to provide the procedure. Government reimbursement is difficult to change because it is limited by fiscal constraints set forth in annual state budgets. Also, third party payors (commercial insurance companies) mirror Medicare and Medicaid when setting their reimbursement rates, so hospitals often provide services at a loss even for individuals covered by commercial insurance. On a positive note, hospitals can increase the amount of reimbursement received from third party payors, however this greatly depends on management's negotiation skills.

The second issue fueling losses at hospitals are sky rocketing costs. Malpractice insurance premiums, pharmaceutical costs, and nursing salaries are increasing at astronomical rates which far exceed that of inflation.

In short, revenues are decreasing, flat, or growing slowly while expenses are increasing a fast pace. This ultimately equates to reduced profitability or in many instances, losses.

Fortunately, there are many things that hospitals do to counter these issues including fund raising efforts and implementing cost constraints to improve operating efficiencies. Hospitals can also affiliate with other local hospitals in order take advantage of group purchasing contracts for discounted supplies and vendor equipment purchase agreements. Management can seek reimbursement rate increases from third party payors.

Additionally, many hospitals have very large endowment funds and great access to capital (e.g., bonds), which provides the hospital with liquidity when cash flow from operations is non-existent due to losses. In my experience over the last five years, I have discovered that hospitals are old pros when it comes to dealing with reimbursement issues and related losses. Despite a very tough industry climate, the majority of hospitals prevail. In the last decade, there have been very few hospital closings nationwide.
 

medicine1

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