Hospitals Catch Recession: Dwindling Income, Shrinking Investments Take a Heavy Toll

Hospitals in California are ailing from the recession, according to a report released Wednesday.

The symptoms: more uninsured patients in emergency rooms, staffing cuts and people struggling to pay their hospital bills.

Some hospitals are talking about closing programs that are losing money, such as obstetrics or psychiatric units. Others have halted construction projects because they can't get financing and will be unable to meet deadlines for earthquake standards.

The California Hospital Association gathered the information from a November survey of hospital chief financial officers.

"As more people lose their jobs in this economy, they also are losing their job-based health insurance," said C. Duane Dauner, president and chief executive officer of the CHA. "The growing number of uninsured, coupled with inadequate Medi-Cal payments and the ripple effects of the financial crisis, is leading to a decline in the financial health of California's hospitals."

Hospitals are not just places where babies are born or people are treated for pneumonia. They are often among the largest employers in their respective communities and generate income for other businesses.

But the economy is hurting their ability to contribute to the state's economic health, said the CHA, an industry trade group. The survey found:

• A 73 percent increase in patients who were unable to pay their share of a hospital bill

• More than 25 percent of hospitals reported problems in obtaining financing for construction or equipment.

• Forty-one percent of hospitals were suspending construction or equipment purchases.

• One-third of hospitals had an increase in emergency room visits from uninsured patients.

Officials at hospitals in Stanislaus County acknowledge the recession's impact, but say they have avoided major staffing cuts or elimination of crucial programs.

In Turlock, Emanuel Medical Center's struggles are not a secret. In November, hospital management told employees it lost $3 million in October and was facing similar losses in future months if expenses were not controlled.

Emanuel officials have said their facility has lost patients to the newly opened Kaiser Modesto Medical Center. In addition, business closings, unemployment and the increasing ranks of the uninsured are taking a toll.

Spokesman John Gilbert said Wednesday that patient volumes are still down but the hospital is keeping costs in check. The cost-cutting measures have resulted in many staff members working fewer hours.

"The level of service and number of patients has been consistent over the last three months," Gilbert said. "We are still doing things to manage staffing and our expenses. I am not aware of any discussion to close programs."

Economy 'impacting all of us'

At Memorial Medical Center in Modesto, spokeswoman Catherine Larsen conceded that "the economy is impacting all of us."

"While we haven't seen any changes that would constitute a pattern at this time," Larsen said in an e-mail response, "it is still very early in the year and we will see what happens in the future."

Officials at Doctors Medical Center in Modesto declined to comment on the state report, saying they don't disclose business information.

Hospitals in Stanislaus County went through a building boom before the recession began more than a year ago. Memorial and Emanuel completed major additions to expand their patient capacities, and the construction of Kaiser Modesto Medical Center was completed months before the hospital's floors opened in October.

Despite the gloomy economy, Oak Valley Hospital in Oakdale is moving forward with replacing its building. Preliminary work is being done at the site, and the project is expected to be completed in summer 2011.

After bond measures to pay for rising costs failed twice last year, Oak Valley went back to the state with a revised plan and will use its 2004 bond issue and future revenues to complete the project.

Spokeswoman Susan Mendieta said Oak Valley hasn't noticed a surge in ER visits from uninsured patients. People on Medi-Cal or those without insurance can see doctors at community health clinics operated by the nonprofit hospital district, so they don't have to use the emergency room, she noted.

In another sign of trouble for hospitals statewide, almost 70 percent reported an erosion of their invested reserves, which often are used to tide them over in rough times. A number of hospitals were concerned about their ability to comply with cash and liquidity measures in bond covenants.

"It's clear from the survey results that the economic challenges facing all Americans are also affecting the hospitals who provide care to us when we are sick or injured," Dauner said. "When our hospitals are at risk, we are all in danger."