Something’s Gotta Give, Something’s Gotta Give, Something’s Gotta Give!

November 1st, 2008 by Nick Jacobs Leave a reply »

My Facebook friend, Anne Zieger, editor of Fierce Health Finance, wrote a compelling piece the other day regarding the potential demise of hundreds of hospitals. Her prediction is based upon some very valid financial realities, and we are witnessing them locally as well as nationally. Not unlike the little banks in our area that seemed to have been insulated from Wall Street’s collapse, some of these national problems seem to be washing over some of the smaller hospitals with relatively minimal damage. Yes, many of us have seen as much as a 10% decrease in elective, outpatient procedures.

In fact, while visiting a really upscale mall for a photo session with my two year old granddaughter, Lucy, an employee engaged me in a conversation about the rotten economy. About five minutes into the conversation, she indicated that there are currently 150 stores in the chain for which she works, and that only five percent of them made budget last month. Portrait pictures must fall into the category of a luxury as their business is severely impacted by this economy. More directly, however, she indicated that she needed stitches removed the other day, and that, “she did it herself” rather than spend the $20 co-pay.

So, are we seeing decreases in important tests? Are we seeing patients avoiding emergency room visits? Are we seeing patients cutting their prescriptions in half? Yes, to all of these questions. Anne, however, seemed to be talking about the “big boys,” where their millions or billions in investments have recently tanked. If you are so big that your income from running the hospital is not a major source of protection, and your income from your investments is propping you up, then the problems begin to manifest themselves exponentially.

“Some hospitals are responding by digging into their investment income more deeply than usual, using it to finance capital projects, or even meet operational needs. Others are issuing bonds with the scary codicil that they’ll buy them back if finicky investors want to dump them,” states Zieger in her column.

She further goes on to explain that “both of these situations put a huge squeeze on hospitals’ long-term viability. One robs from their long-term assets to solve medium-term problems, while the other puts the hospitals at risk of being bled dry by investors who get spooked.”

Well, wouldn’t ya know? Yes, we are seeing a few challenges due to decreased electives, but not because we were living off of our investments. The other good news is that, because we froze our fixed pensions several years ago, we are seeing very little impact upon them from the huge drop in those investments as well. Unlike many of our larger peers, neither of these issues is similar. Between the drops in the market, the loss of pension funds, the decrease in electives, and the down-grading of their viability by the bond markets, their challenges look galactic in size compared to ours.

Sometimes smaller is just safer.



  1. Damjan says:

    Love the post, and Anne Zieger’s as well.

    But if you are bigger, and the day comes when you can’t afford safer, what then?

    The world is getting flatter and health care systems around the world are catching up to American standards of care. With many countries in Southeast Asia in particular already having caught up and turned themselves into lower cost competitor to the United States, isn’t a day of reckoning for many US hospitals approaching? Wrote a post on this just now at, titled “Note to Hospital Billing Center: I’m going next door where the free teddy bear is really free”, and would love to hear what you think.

  2. Nick Jacobs says:

    I think you are, in some ways, right on the money . . . so to speak. Of course, Mayo, Cleveland, and UPMC Pgh are all taking their product international. So, that trip to Sicily might be to a UPMC hospital? Actually, it seems that the human “masters of the universe” ego at some point takes over when dealing with the BIG places. We’ll see what the next few years bring. I believe that the Obama Adm will cause unbelievable change. Just not sure how, what, or where.


  3. Liebe SMS says:

    wunderbare ausnusa der leitalen zu gilferung mit hrlig und latig. aubha den vordecken des marbeinfo ohne kadeneand, beraten, fieben oder pocku.

  4. Circus says:

    eccellente prever de flata y ncuza con cubscre suzeguga. riono a ranicos y hosseria escremes con exinonol icutavo!

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