Analysis Shows Hospitals Have Returned to Pre-Recession Status

Hospital financial performance generally returned to pre-recession status by 2011, according to a report published in Health Affairs. The research examined financial performance of nearly 3,000 acute care hospitals from 2005 through 2011.

 

“Hospitals that were strong financial performers before the recession remained strong during the study period, while hospitals that were financially weak remained weak,” the study’s authors wrote.

 

Total margins for hospitals with positive margins as well as hospitals with negative margins at the beginning of the study period fell in 2008, but had recovered by 2011. However, operating margins for hospitals with negative operating or total margins generally declined throughout the study period. The authors of the study attributed the rebound in total margins to increases in non-patient care revenues.

 

Although earlier research suggested that safety net hospitals (defined based on the proportions of Medicaid patients) may have benefited from the recession because they received stimulus money from the 2009 American Recovery and Reinvestment Act, the study published in Health Affairs indicated a widening gap between the financial performance of safety net hospitals and other hospitals after the recession, especially in total margins.

 

Implications for Reform

 

Study results suggest that the future may be dim for hospitals that continue to have negative margins. The study’s authors wrote that “the limited recovery of total margins for safety net hospitals and the continued negative margins for institutions that were financially weak before the recession may imply that these groups are not well positioned to meet future challenges.”

 

Leaders at these hospitals should carefully evaluate the care delivery provisions of the Affordable Care Act (ACA) that have or will be going into effect and take steps to weigh options to effectively address these provisions. Effective implementation of the ACA provisions could potentially help turn around negative financial performance. Alternately, poor preparation and implementation could exacerbate the difficult financial position of these hospitals.

 

(Source: “Study: No Permanent Recession Effect on Hospitals,” HFMA Weekly News, May 14, 2014)

 

 

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