When Howard University in Washington announced in May it was restructuring Howard University Hospital by appointing its first-ever board of directors, the decision was not surprising in the context of the volatile local healthcare market.
After all, Howard not only faces the woes of many inner-city academic medical centers nationwide, but also shares with other local hospitals the pressures of a deep financial crisis in the District of Columbia government.
But hospital officials said they are looking beyond the current fiscal turmoil in the restructuring, which also included making the hospital, with 515 licensed beds, a wholly owned subsidiary of the university because the hospital must better compete in a changing healthcare market.
"If everything else were going fine, we'd still do this," said Charles Epps, M.D., acting executive director and chief executive officer of the hospital and university vice president of health affairs.
Having a board of directors specific to the hospital, rather than being overseen by a university board, will allow the university to respond more rapidly to market conditions, such as bidding for new HMO contracts, Epps said.
In many ways, Howard's challenges are the same as those faced by all urban teaching hospitals. They include uncompensated care and the threatened reduction of Medicare graduate medical education funding.
But in other ways, Howard's squeeze is different. The deficit in Washington-more than $700 million on a fiscal 1995 budget of $3.2 billion-threatens the district's own public health infrastructure, including cutbacks at the public District of Columbia General Hospital, which could push more uncompensated care onto Howard.
Furthermore, Epps said, the district may try to enroll more of its Medicaid population in managed care as it tries to control its deficit.
"We need to be able to compete for those patients," Epps said.
Finally, Howard University has been a recipient of a special federal educational appropriation-$206 million in federal fiscal year 1995-that Congress has proposed revoking as it tries to balance the federal budget. Howard University Hospital has received a large share of that appropriation, but officials said they couldn't be more specific about the amount.
In fact, the uncertainty of Medi-caid payments, the future of the public healthcare system and the threatened federal cutbacks have spurred Moody's Investors Services to downgrade the bond rating of the whole university a notch to A from A1.
The hospital expects to post a loss of $10 million for the fiscal year ended June 30 and is aiming to break even in fiscal 1996, Epps said.
To ensure the financial viability of the hospital, the board may have to consider cutting back medical programs and reducing the number of medical students from the current 460, as well as decreasing the number of residents at the hospital, Epps said. Selling the hospital is not an option, as one other Washington medical school, George Washington University, is considering.