Market, use rate impact hospitals

April 5, 2009
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Deliveries of babies in Michigan hospitals in 2008 dropped by 10 percent in west-central Michigan, which includes Grand Rapids, according to the Michigan Health & Hospital Association. Statewide, baby production was off by 8 percent.

Those “manufacturing” facts may speak more about Michigan’s future than any statistical analysis or academic study about the battered economy.

“I don’t know what that means — whether people who are planning families are putting it off because of the economic situation?” guessed Peter Schofeld, vice president of policy for the MHA.

Schofeld doesn’t have to guess about the financial pressures on the state’s 145 acute care, nonprofit hospitals these days. More charity care, more bad debt, growth in Medicaid rolls, especially outstate, have combined with investment losses and some volume declines to push hospitals’ aggregate margin to a negative 2.9 percent in 2008, according to an MHA report based on its monthly hospital survey.

Several West Michigan hospital executives say their organizations are hanging onto positive margins. Hiring freezes, layoffs, project delays and general belt-tightening have or are occurring.

At Spectrum Health — where births decreased by 6.8 percent from 2007 to 2008 — economic repercussions include down markets for investments and debt, CFO Mike Freed said. Investment markets have been “problematic” for nearly two years, he said.

“Last year — 2008 — the unrealized losses were about $99 million. The year before that — 2007 — they were a positive $54 million,” Freed said. Spectrum Health’s fiscal year runs July 1-June 30.

The combined financial statements for the first six months of the 2009 fiscal year revealed that system-wide, non-operating losses amounted to a total $263.2 million. In the statement, Freed attributed about $153 million of that to realized and unrealized losses on investments and another $107 million on unrealized losses on financial instruments.

“So it’s been significant in that regard,” Freed said.

The operating margin for Spectrum’s Hospital Group stood at 3.2 percent after six months, less than budgeted. “From an operations standpoint, we’re right where we expected to be,” Freed said.

Outpatient admissions had increased by 2.5 percent from the December 2007 level, while inpatient admissions were down by 2.9 percent.

“We’re seeing fewer patients who are insured,” Freed said. “We’re seeing the same amount or maybe slightly less of those who have Medicare or Medicaid. Much of our softness in admissions has been in the commercially insured sector.”

While charity care and bad debt are up, Freed said Spectrum Health is seeing fewer uninsured patients than hospitals in other states.

Despite persistent rumors to the contrary, Freed said that layoffs are not imminent at Spectrum Health.

“We’ve been able to cut back on expenses. Mostly, we’ve cut things like overtime, keeping people employed but being careful about where we’re spending money,” he said. “We’re not filling positions that we don’t absolutely have to fill. … We are not anticipating layoffs.”

Schofeld said that enrollments in Medicaid, the state and federal government health insurance for the poor, reportedly are going up in outstate areas. Michigan Department of Community Health statistics show that enrollment in Medicaid health plans in Kent County grew about 4.6 percent from December through March, to 65,458, and in Ottawa County, by nearly 7 percent in the same time period, to 15,054.

At Saint Mary’s Health Care, where births were down 7.3 percent between fiscal year 2008 to fiscal year 2009, requests for charity care are leveling off, said Steve Pirog, CFO for the Trinity Health-owned hospital.

“Just as of the last few months, it seems to be stabilizing. I’m not sure that’s a trend we can count on,” Pirog said. “Saint Mary’s experienced a large growth in bad debt and charity last fiscal year, but we may be ahead of the curve a little bit.”

Saint Mary’s has done limited layoffs, he said.

“We’re looking at all the different lines of business and have to make decisions that things need to change,” Pirog said. “It’s usually small changes here and there that add up. We’ve made some very selective position eliminations over the last number of months as we look at programs and opportunities to assess all the things we’re doing. We have, as a system — because of the economics around the poor investment performance — had to reign in some capital investment.”

He did not know how many people were laid off, but said it is “not a very large number” and was unaware of any further job cuts.

“Right now, we’re making a reasonable operating margin.”

According to spokesman Tim Breed, Holland Hospital is seeing more people without insurance and walking away from hospital bills, especially in the wake of a string of layoffs in Ottawa County.

With a fiscal year that ended March 31, “we are anticipating finishing the fiscal year close to 3 percent,” Breed said.

Metro Health Hospital, meanwhile, has been seeing an increase in patient volumes since its move from Grand Rapids to Wyoming, spokeswoman Ellen Bristol said. The hospital did undergo a round of layoffs in 2008. The number of babies delivered at Metro Health in 2008 was up by about 12 percent, from 1,438 in 2007 to 1,616.

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