Dr. Teresa Waters is Senior Author of Paper Examining the Post-Recession Financial Health of Hospitals

While the recession was a major financial blow for many hospitals, particularly not-for-profit and safety-net hospitals, most emerged without permanent damage. But many still may not be financially strong enough to respond to the pressures of health care reform and industry restructuring.

Dr. Teresa Waters headshot

Dr. Teresa Waters

That’s the conclusion of a paper presented at the National Press Club during a recent briefing to policymakers, congressional staffers and health care industry professionals by Health Affairs, a leading journal of health policy thought and research. Teresa Waters, PhD, professor in the Department of Preventive Medicine at the University of Tennessee Health Science Center (UTHSC), was the senior author of the paper. Gloria Bazzoli, PhD, professor of Health Administration at Virginia Commonwealth University, was the lead author, and Naleef Fareed, PhD, assistant professor in the Department of Health Policy and Administration at Pennsylvania State University, was co-author and presenter.

“Hospitals, especially not-for-profits, took a substantial hit during the recession, but came out financially pretty much about the same on the other side,” Dr. Waters said. “But many hospitals, especially safety-net hospitals, struggle immensely. Their margins are very thin, if not negative, and that means that they are in no real position to accommodate the tremendous changes we are asking of them now.”

The findings were based on data from Medicare cost reports from 2,971 private, short-term, general-medical or surgical hospitals from 2006, two years before the recession started, through 2011, which is generally considered the start of the recovery. The researchers looked at two measures of hospital performance, total margin or bottom line, and operating margin, the income and expenses for patient care.

“One is strictly patient care, and the other actually takes into account donations,” Dr. Waters said. “Not-for-profits can lose money on their patient care, but they have donors who make up the difference, or if it’s a public hospital, the government can fill the gaps. That’s often the difference between operating margin and total margin.”

The paper, published in the May edition of Health Affairs, points out that the challenging financial situation that many safety-net and not-for-profit hospitals are always in will be exacerbated by new challenges in the health care industry.

“The literature traditionally shows that hospitals, while perennially having these very thin margins, tend not to close because they get bailed out over and over and over again,” Dr. Waters said. “So the question is will that be true going forward.” Will communities have to step in even more, as hospitals face greater challenges?

“Major payment reform and industry restructuring brought on by the passage of the Affordable Care Act will put significant pressures on hospitals of all types, but especially on financially weak and safety-net institutions,” the paper said. “Thus, it will be critical to assess carefully how the various provisions of the act are affecting these hospitals, the care they deliver and the populations they serve.” To read more, go to: http://bit.ly/RYYuhf