COLUMBUS, Ohio — Even though business economists see the nation’s economy brightening next year, the worst recession in 70 years continues to threaten the financial health of Ohio’s hospitals, according to a recent member survey by the Ohio Hospital Association.
Like all businesses, hospitals are cutting costs to stay afloat during the recession, according to the association’s survey report (pdf). But unlike most businesses, hospitals are expected to provide some services free to patients who cannot afford them. Hospitals are reimbursed by federal programs for only part of this free care, though hospitals, like other non-profit organizations, also are exempt from real estate taxes.
This year, Ohio’s hospitals face a new financial challenge: A corporate franchise fee that was needed to help close a large hole in the state’s biennial budget. Hospitals will pay the first installment of the fee, which the hospital association calls a “tax,” on Nov. 30.
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The hospital association estimates that fee will cost hospitals $718 million over the next two years. An increase in Medicaid and other reimbursements by the state will largely offset the new fee. However, the hospitals are expected to pay a net fee of $145 million over two years, according to Tiffany Himmelreich, spokeswoman for the hospital association.
Ohio hospitals are coping with the effects of the recession — from lower reimbursements from federal Medicaid and Medicare programs, to treating more uninsured patients, some of whom can’t afford to pay — by cutting jobs or letting job vacancies go unfilled, cutting services and delaying expansions, according to the survey to which 75 hospitals responded. That’s 51 percent of the hospital association’s members.
Nearly half of hospitals already have cut jobs and two in three hospitals have not filled job vacancies, according to the survey. These findings are consistent with comments made last week by the Cleveland Clinic and Summa Health System in Akron, which are filling only necessary positions. One in five responding hospitals said they expect to cut more jobs in the future and half expect to let future vacancies go unfilled.
One in three respondents have reduced or eliminated services, while two in five expect to take these steps in the future. Only 12 percent of respondents said they have delayed or canceled expansions or construction, while 49 percent said they would do so in the future.
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Meanwhile, four in five hospitals (81 percent) have cut costs in other ways, such as reducing their community benefit spending and reducing employee benefits or freezing wages. A smaller percentage of hospitals — 64 percent — expect to make these cuts in the future.
More than a week ago, both the Cleveland Clinic and Summa said they froze unnecessary expenses — travel, subscriptions, training — going into the recession. These preemptive cuts meant operating income for these institutions fell less than it would have without the cuts.
Neither the Clinic nor Summa see a loosening of cost controls in the near future, largely because levels of uncompensated care continue to rise. “I think we are going to have to be diligent next year in our expense controls,” said Kevin Theiss, vice president of revenue cycle at Summa.
However, Summa can’t put its growth plans on hold forever. That would sacrifice the health system’s strategic plans for emergency measures. “We’ve got to look at ways to improve volume and manage that core business as well as we can,” Theiss said.
Another recent financial strain for Ohio hospitals: The H1N1 flu pandemic has been filling emergency rooms with patients complaining of flu-like symptoms.
“The flu epidemic exemplifies why hospital renovations are necessary and why this new tax is so devastating,” said James R. Castle, president and CEO of the hospital association, in a written statement. “Hospitals are facing a series of bad choices. More layoffs and service reductions will mean longer waits and higher costs for all patients.”
