I'm Sure Nurses Will Get the Blame for This Too

  1. Somehow, some way, the powers that be will ultimately blame greedy nurses.

    http://www.nytimes.com/2004/12/23/bu...rtner=rssyahoo

    Health Care Analysts See Bleak Outlook for Hospitals
    By REED ABELSON

    Published: December 23, 2004


    CHILL is in the air for hospitals accustomed to having insurers - both public programs like Medicare and private health plans - pay ever higher prices for hospital services. That era appears to be ending, some analysts say.

    For companies like HCA, Tenet Healthcare and other hospital chains, the outlook for the future is largely negative, said Gary Taylor, an analyst who follows for-profit hospitals for Banc of America Securities. "I think it's a big risk," he said. For example, Mr. Taylor noted, growing Medicare costs may well force the Bush administration to insist that hospitals bear the brunt of any future efforts to reduce the program's costs.

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    Hospital stocks have had a lackluster year, largely because of slow growth in patient admissions and a rise in unpaid bills, or bad debt, from people without enough insurance coverage or any coverage at all.

    "The stocks underperformed the market," said John Ransom, director of health care research for Raymond James & Associates, who follows many hospital companies. Unless a better economy in 2005 leads more people to use hospital services and to pay their bills, he says he thinks the stocks will continue to suffer.

    The shares of HCA, which is the largest for-profit chain, for example, have fallen by about 9 percent since January. Shares closed yesterday at $39.10.

    And Tenet has said it does not expect to do more than break even in 2005. Shares in Tenet are down about a third this year and closed yesterday at $10.68. Tenet announced on Tuesday that it had agreed to settle, for $395 million, patient lawsuits stemming from accusations of unnecessary heart surgeries at one of its California hospitals. The company still faces numerous other lawsuits as well as significant operational challenges.

    The financial outlook for next year may be even worse, said Mr. Taylor, who recommends selling Tenet stock and is neutral on HCA.

    The hospital industry's weak prospects for the coming years have much to do with the Medicare bill enacted last year, which for the first time committed the federal government to help pay for prescription drugs for Medicare recipients. As part of that reform, the federal program says it will increase the participation of preferred-provider plans in delivering care. For most people, Medicare pays doctors and hospitals directly without making use of a managed-care plan.

    Expanding the use of preferred-provider plans, Mr. Taylor said, "would be a huge negative for the hospitals" because those plans are better able to negotiate lower prices with hospitals and to restrict hospital admissions.

    While Medicare hospital payments are relatively generous under the reform bill, analysts say, those rates may be cut if the cost of drugs for the elderly soars and the federal budget deficit grows. Many say they believe federal policy makers will look to hospitals as a place where they can save money, as they did in the mid-1990's when they substantially reduced payments to balance the federal budget.

    Early next year, the Medicare trustees will issue their annual report on the financial health of the program. Mr. Taylor predicts that pressures from the new drug benefit will force a rethinking of hospital payments under Medicare.

    Mr. Ransom also said investors should keep an eye on Medicare discussions early in 2005, but he added that Congress might instead turn its attention to overhauling Medicaid, the state-federal insurance program for the poor.

    In any case, hospitals cannot count on growth in overnight admissions to rescue them. As Mr. Taylor said, "You've got a very mature industry."

    In recent years, hospitals have raised prices aggressively, a strategy they used in negotiating contracts with private insurers and in seeking reimbursement under a special provision of Medicare that paid them for unusually expensive cases. But publicity over soaring charges - and the failure of a growing number of uninsured patients to pay those charges - are likely to reduce aggressive pricing, Mr. Taylor said.

    In the meantime, specialty hospitals, which cater to the most profitable areas of medicine like cardiac care, are siphoning off patients from community hospitals that provide a full range of services. The Medicare law included an 18-month provision to discourage new construction of specialty hospitals owned by doctors.

    Congress must decide by the middle of next year whether to extend the provision to protect community hospitals, which say they need to retain specialty care to subsidize medical services that do not make money. The Medicare Payment Advisory Commission, the group that advises Congress on these issues, recommended this month that doctors not be allowed to send Medicare patients to new hospitals in which they have an ownership stake. It will issue a formal report in early 2005.

    "Hospitals really don't compete that well," said Mr. Ransom, who added that Medicare might also review its payments for services like cardiac care to try to reduce the profitability of those services.

    What the industry may experience is a variety of deal making, as some of the publicly held hospital companies merge or are bought or taken private, Mr. Ransom said.

    Martin D. Arrick, a managing director for Standard & Poor's who specializes in not-for-profit hospitals that issue tax-exempt bonds, said "2005 is going to be the year that the sector outlook really begins to shift." He predicts that a widening divide between wealthy hospitals and weaker ones that cannot raise money could lead to more hospital mergers.

    "There has been a slow but steady decrease in the hospitals, and that will continue," Mr. Arrick said.

    But the real question facing investors in 2005, Mr. Ransom said, is whether hospitals are simply suffering through a down part of a cycle or whether the industry is facing fundamental changes as specialty hospitals and outpatient centers take away more of their business.
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  2. 4 Comments

  3. by   SmilingBluEyes
    I am sure nursing will, too. We are a HUGE target, and so visible. the bottom line is very hazy except to those in administration after all. Even nursing has a poor understanding of how the health care business works, so we make ourselves targets, as well.
  4. by   BeachNurse
    Sad. We must recognize that this is not the case all over. Hospitals are doing well in my area, in fact there are two in the process of being built right now and large scale improvements being done on existing hospitals. The company I worked for was so far in the "black" that they gave bonuses to all employees this December..mine was a nice $923.00 check that I used to buy gifts with. Apparently something is going right somewhere.
  5. by   Katnip
    I agree some hospitals are doing things right.

    One of the problems is administration in most hospitals approach it like any other type of business. They don't understand that healthcare is vastly different from manufacturing widgets, and they tend to use the same tired formulas.

    Managing healthcare facilities well really does take "thinking outside the box." Just cutting personnel isn't going to help.
  6. by   oramar
    Quote from cyberkat
    I agree some hospitals are doing things right.

    One of the problems is administration in most hospitals approach it like any other type of business. They don't understand that healthcare is vastly different from manufacturing widgets, and they tend to use the same tired formulas.

    Managing healthcare facilities well really does take "thinking outside the box." Just cutting personnel isn't going to help.
    Right on!

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