Hospital lobbyists looking to claim some of the $825 billion economic stimulus package working its way through Congress might point to the results of two new surveys of hospital executives.
The surveys, conducted separately by the Healthcare Financial Management Association and the American Hospital Association, both indicate that hospitals are struggling more than ever to find credit and are delaying capital spending in response.
Nearly 80% of the respondents to the HFMA survey said that they expected to cut back on information and medical technology spending in the next three to six months, and 72% said that they expected to cut back on new construction expenditures. More than half of the responses in the latter category reported an outright hold on new construction projects.
There is less credit available, and it is more expensive credit, according to both surveys. Investment portfolios have been battered by the falling equity markets, too, Richard Clarke, president and chief executive officer of the HFMA, said in an interview. All of those things are putting a cash flow crunch on hospitals, he said. Even those that are relatively healthy are experiencing those challenges.
While financially healthy hospitals and systems are being affected, the HFMAs survey shows that hospitals that reported financial margins and ratios that are symptomatic of lesser access to credit are being hit even harder by the credit crunch.
Based on the financial information reported by the 309 hospitals and systems that responded to the survey, 32% were classified as having broad access to capital, and 18% were classified as having limited access to capital. The survey had a 19% response rate and included tax-exempt, investor-owned and public hospitals.
The HFMA plans a series of surveys roughly every quarter, with many of the questions asked each time to show trends, Clarke said.
In the AHA survey, 45% of the 639 respondents said that they had already postponed capital projects that were planned to start within six months. That percentage included 13% of respondents who halted projects already in progress.
The survey, conducted in late December 2008 through Jan. 6, 2009, had nearly a 13% response rate and was a representative mix of nonfederal hospitals in terms of geography, size, urban vs. rural, and ownership type, according to the AHA. About 5,000 surveys were sent out.
Uncertainty about the economy was far and away the most-cited reason for delaying projects, but those surveyed cited three other factors nearly as much: decline in operating performance, usual sources of capital unavailable and decline in the value of reserves. All three factors were named very important by more than half of those who had delayed projects, and another 17% to 30% in each case said that those factors were somewhat important, according to the survey results.
Richard Umbdenstock, president and CEO of the AHA, said that the association definitely plans to use the results of the survey to press the case for hospitals in Congress. Lawmakers know that the credit crunch is crippling the economy, Umbdenstock said during a conference call to discuss the results. We hope this survey information will be heard in the debate on Capitol Hill.
The economic stimulus bill that the House is working on includes a provision that increases the incentives for banks to purchase and hold tax-exempt bonds, said Mike Rock, an AHA lobbyist, during the conference call. The bill also includes funds for healthcare IT, Rock said.
The HFMAs Clarke noted that the organization is nonpartisan and does not lobby Congress, but does provide information to policymakers. Clarke also warned that the current economic crisis could bring a wrenching consolidation to the hospital sector. If the credit turmoil continues for some time, and its very likely that the economy will get worse before it gets better, that will cause a restructuring of healthcare that no reform in Washington could bring about, Clarke said.
A version of this story initially appeared in this week's edition of Modern Healthcare magazine.