Information released this week by the American Hospital Association (AHA) shows how the worsening economy has taken a toll on U.S. hospitals. 

According to AHA, U.S. hospitals provided $36.4 billion in uncompensated care in 2008, a $2.4 billion increase over 2007.  Uncompensated care is the combination of bad debt (money hospitals expected to receive for care provided but did not) and charity care (money not expected to be received from patients who met the hospital’s guidelines for free care). 

In Iowa hospitals, uncompensated care totaled $709 million in 2008, up from $613 million in 2007. 

Meanwhile, underpayment by Medicare and Medicaid to U.S. hospitals reached $32.4 billion in 2008, up from $31.9 billion in 2007 and $3.8 billion in 2000, respectively.  Medicare reimbursed 91 cents and Medicaid reimbursed 89 cents for every dollar hospitals spent caring for these patients.  In Iowa during 2008, Medicaid losses totaled nearly $178 million, while Medicare losses amounted to $103 million. 

The poor economy and the rising cost of insurance have led to more people becoming uninsured.  Research has shown that for every one percentage point increase in unemployment, 2.5 million people lose their employer-sponsored insurance.  More uninsured people means more spending by hospitals to pay for care for people who cannot pay for it themselves. 

Some of the uninsured qualify for government assistance to pay their medical bills, often through the Medicaid program.  But Medicaid doesn’t pay hospitals for the full cost of care (neither does Medicare, but Medicaid pays even less) and hospitals must cover the difference.  With more people going on Medicaid, that difference is growing larger. 

How does this impact hospitals?  Well, for one thing, the growing demand for charity care and more instances of bad debt makes it harder for hospitals to pay better salaries (it’s well known that Iowa nurses salaries are among the lowest in the nation) that help keep medical professionals (particularly young ones) in the state.  It also makes it harder for hospitals to build reserves that pay for replacing aging equipment and improving services. 

But uncompensated care and underpayment by Medicaid and Medicare also impact individual Iowans, because these costs are shifted to payers who do cover their full cost of care – mainly people who are privately insured.  In Iowa, Wellmark has estimated that 10-15 percent of the dollars it pays to Iowa hospitals and physicians is to compensate for government programs’ shortfall. 

Uncompensated care and underpayment by Medicaid and Medicare are always a challenge for hospitals.  This is why IHA supports efforts to insure more Iowans and more Americans and why IHA has fought to keep the government from cutting Medicare and Medicaid payments.

Virginia Gay Hospital in Vinton will be celebrating an important milestone in its ongoing $8.5 million expansion and renovation project.  Improved areas will be open for public touring this week, including imaging services (with new equipment and private waiting areas, emergency services (now with five fully equipped private exam rooms), therapy and rehabilitation (featuring a new hydrotherapy pool) and acute care, which is now fully private and completely remodeled.

It was 95 years ago this year that former Vinton resident Virginia Gay willed $50,000 to the city for the purpose of building a hospital.  With that initial donation (worth more than $1 million in today’s dollars), the hospital was able to open in 1923.  Today, her namesake hospital has more than 200 employees and provides more than $9 million to the local economy.

Much like Virginia Gay herself, the people of Vinton and Benton County continue to invest in their hospital.  More than $2 million was raised to support the $8.5 million effort.

IHA released its latest economic impact report in January 2009, providing statistics on the number of jobs generated by community hospitals and the amount of money added to the state’s economy.

Despite the increasingly important role hospitals play in Iowa communities, they are just as susceptible to feeling the impact of a downturn in the economy. Comparing hospital data from the fourth quarter of 2008 to the same period in 2007 shows declines in virtually all service areas.

Thanks to the American Hospital Association, now you can hear specifically from leaders in Iowa hospitals about how they are dealing with these economic challenges. AHA spoke with several Iowa hospital executives at the AHA annual meeting this week and provided video clips on YouTube. Read more

The ill effects of the nation’s struggling economy are being felt by Iowa’s hospitals, according to data gathered by the Iowa Hospital Association.

Comparing data from the fourth quarter of 2008 to the same period in 2007 shows declines in virtually all service areas, from home health visits (down 5.2 percent) to inpatient surgeries (down 2.2 percent).

More significantly, charity care and bad debt increased 13.3 percent, meaning Iowa hospitals are treating more patients who are unable to pay for their care.  Nearly $72 million in charity care and bad debt was provided during the last three months of 2008, a record amount for a single quarter.

Such losses have also impacted hospitals’ already thin margins.  Operating margins have fallen from 2.8 percent for the final quarter of 2007 to .8 percent in 2008.  But when investment losses of hospital reserves are calculated in, margins that were at 5.5 percent in 2007 slid to -9.6 percent at the end of 2008.  This equates to an overall loss of more than $160 million in the fourth quarter alone.

In all, 45 percent of Iowa hospitals lost money on operations and 45 percent of Iowa hospitals lost money on total revenue in the fourth quarter of 2008.  This compares to 45 percent losing money on operations and 20 percent on total revenue in 2007.

“Just like other businesses, hospitals are subject to the hardships of the economic downturn,” said IHA President/CEO Kirk Norris.  “But on top of those issues, hospitals are expected to provide an essential public service, every day and at all hours, at a time when a growing number of individuals are in need.”

Also unlike other businesses, hospitals experience huge losses because Medicare and Medicaid, which together make up about 60 percent of Iowa hospital revenue, do not cover the full cost of providing care to their beneficiaries.  In 2008, Iowa hospitals lost more than $275 million to the two programs.

“As political leaders in Des Moines and Washington, D.C., look for ways to address and stabilize the economy, it is important they remember the burden government health care programs already place on hospitals and physicians,” Norris said.  “Health care is a social and economic cornerstone for Iowa and the nation, now more than ever.”

Hospitals in Iowa employ more than 72,000 people and have a $5.8 billion impact on the state’s economy.  In counties where they are located, hospitals are typically among the largest employers.

Iowa’s community hospitals generate 149,096 jobs that add more than $5.8 billion to the state’s economy, according to the Iowa Hospital Association’s latest Iowa hospital economic impact report.  In addition, Iowa hospital employees by themselves spend nearly $1.9 billion on retail sales and contribute more than $112 million in state sales tax revenue.

“Even in these difficult economic times, Iowa hospitals remain major employers and business partners throughout the state,” said Kirk Norris, IHA president/CEO.  “In addition to providing essential health care and community services, hospitals are at the foundation of Iowa’s economic infrastructure.  The state’s economic security is clearly linked to maintaining the high-quality health care system we now enjoy.”

The IHA study examined the jobs, income, retail sales and sales tax produced by hospitals and the rest of the state’s health care sector.  The study was compiled from hospital-submitted data on the American Hospital Association’s Annual Survey of Hospitals and with software that other industries have used to determine their economic impact.

The study found that Iowa hospitals directly employ 72,220 people and create another 76,876 jobs outside the hospital sector.  As an income source, hospitals provide $3.3 billion in salaries and benefits and generate almost another $2.4 billion through other jobs that depend on hospitals.

In all, Iowa’s health care sector, which includes employed clinicians, long-term care services and assisted living centers, pharmacies and other medical and health services, directly and indirectly provides 366,072 Iowa jobs, or more than one-fifth of the state’s total employment.

“The economic impact of hospitals is sometimes overlooked because the focus is on the services and benefits hospitals provide,” said Rick Seidler, chair of the IHA Board and CEO of Allen Health System in Waterloo.  “But hospitals are large-scale employers throughout the state, and the jobs hospitals provide are important to retaining a young, highly educated and growing population in Iowa.”

In the U.S., hospitals employ nearly more than 5 million people, supporting more than 11 percent of U.S. jobs, according to the American Hospital Association.  Last year, U.S. hospitals spent about $304 billion on goods and services from other businesses, supporting nearly $2 trillion in economic activity.