Healthcare providers may be at risk under healthcare reform, but a recent spate of favorable performance reports makes it difficult to sell a gloomy scenario.
Hospital profit margins, for example, continue their upward trend. All indications are that aggregate profits earned by the nation's hospitals in 1993 will exceed the previous year's 18% increase to nearly $12 billion. The aggregate profit margin of 5.8% through the third quarter of last year is the highest reported by the American Hospital Association since 1986.
A closer look at the figures shows that the rise in hospital expenses has slowed, average length of stay continues to dip and average occupancy rates are sinking.
Furthermore, the number of acute-care hospital closures dropped for the fifth consecutive year in 1993 to the lowest total in more than a decade.
Meanwhile, investors have taken a fancy to healthcare providers and the love affair should continue throughout the year. WDI Capital Markets forecasts that managed-care companies, investor-owned hospital companies and other providers will post double-digit earnings increases in 1994.
Hospitals and healthcare providers are doing a good job of controlling expenses and maximizing resources. Thus, it's little wonder that money-parched government payers are tempted to slash Medicare and Medicaid spending.
But as the Prospective Payment Assessment Commission warns, Congress would jeopardize the health of hospitals and patients if it fails to deliver universal coverage guarantees along with Medicare and Medicaid cuts. Teaching hospitals and others serving a disproportionate share of uninsured patients would suffer the most if Congress approves hefty federal cuts years before states must comply with universal coverage.
The Clinton administration's budget proposal calls for restricting the growth of Medicare spending by $124 billion and Medicaid by $69 billion in the next five years. Other politicians constantly toy with adding more cuts.
But healthcare providers are a resilient bunch. They've withstood the burdens of increased indigence, AIDS, urban violence and managed care. They may be operating out of strength in 1994, but the situation quickly can change. Researchers at the Medical College of Virginia said that reform could spark a rash of defaults on hospital revenue bonds. They concluded that in order to avoid defaults, hospitals need sufficient cash flow to meet debt-service and reduce debt position.
It would be a shame if government-induced healthcare reform placed providers in positions of weakness that inhibited the flexibility needed to combat changes in the marketplace.