Not-for-profit hospitals cannot escape a weak economy, and the sector won't get through the next few years as easily as it did the Great Recession.
That's essentially what analysts said last week in reports from two of the major ratings agencies.
As I have reported previously, hospitals came out of the worst recession since the Great Depression with solid margins. Hospitals protected those margins by holding onto cash and cuts to spending on labor, supplies or services.
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How much does a swing cost? For Accretive Health, the price it paid was $9.2 million.
Accretive Health may have swiftly settled a lawsuit with Minnesota's attorney general, but it cost the company, a new securities filing shows.
“Due to lost operating margin and stranded personnel costs arising from the Minnesota litigation and resulting contract terminations and associated legal defense and crisis management costs which together aggregated $14.6 million, the company had a net loss of $0.6 million as compared with a net income of $8.6 million in the second quarter of 2011,” the filing said.
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The uproar in Minnesota and Congress caused by an inquiry into Accretive Health's business practices apparently did not totally unnerve the company's first and largest customer.
Ascension Health, the nation's largest not-for-profit health system, accounted for nearly 41% of Accretive's revenue at the end of March. Ascension Health also owns 7% of the Chicago-based billing and collection company.
Accretive—which settled a lawsuit last week with Minnesota's attorney general by promising to stay out of the state for two years—disclosed in a filing with the Securities and Exchange Commission that Ascension has renewed its contract for another five years.
Accretive admitted no wrongdoing and continued to reject allegations that it violated patient privacy, debt collection and consumer protection laws.
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Safety net hospitals could see revenue squeezed on more than one front under health reform.
As my colleague Maureen McKinney reported this week, safety net hospitals may fail to earn performance-based payments, according to research published in the Archives of Internal Medicine.
The authors compared performance of safety net hospitals on patient experience measures tied to value-based payments and found they “performed more poorly than other hospitals on nearly every measures of patient experience and that gaps in performance were sizable and persistent over time.”
Under value-based payments, Medicare holds onto 1% hospital payments, which is allocated based on hospital performance.
Meanwhile, health reform, as signed into law, included a shift in the financing of healthcare for people who cannot afford it. The law reduced subsidies to offset hospital losses on uninsured patients by $36 billion over 10 years. But projected 34 million would gain subsidized insurance through Medicaid, the Children's Health Insurance Program or exchanges under the law. Hospitals would see fewer direct subsidies for the uninsured as more patients gain insurance.
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New projections for U.S. health spending, released earlier this week, were the latest figures to suggest that households and employers have responded to the weak economy by spending less on healthcare.
The trend has been pronounced in federal spending estimates and projections since 2009, when U.S. health spending growth hit a historic low rate of 3.8%. (The average annual growth rate, since record keeping began in 1960, is 9.6%.) The first look at 2011, included in this week's data, shows the “lingering effects of the recent recession and modest recovery,” wrote the economists and actuaries who compiled the projections for the CMS in the journal Health Affairs.
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