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Hospitals feel ill effects of recession

Hospitals in California and elsewhere are hurting from financial, economic and government crises hitting all at once.

January 14, 2009|Lisa Girion and Mark Medina

"It's a huge financial mess right now," said Rob Fuller, chief operating officer of Downey Regional Medical Center. "I go around and kick the Coke machines regularly to see if any quarters fall out."

If the state government starts writing IOUs again instead of paying what it owes hospitals, it could plunge many into a cash crisis. Normally, hospitals would turn to credit markets to tide them over until the state paid up.

But the prospect of state IOUs during a credit freeze is truly chilling, Fuller said. "That scares me the most."

In recent years, employers have slowed the rate of increase in their healthcare expenses by shifting costs onto workers through higher deductibles and reduced benefits. As a result, patients are responsible for a bigger portion of their hospital bills. So more patients are unable to pay their portion of their bills. Three out of four hospitals surveyed by the California association said they had experienced a rise in the number of patients who have insurance but are unable to pay their out-of-pocket expenses.

At NorthBay's VacaValley and Fairfield hospitals, the value of such uncollectable bills rose to $6 million in December, up from $1 million in July. "It happened at an alarming rate," Huddleston said.

"We're not just seeing an increase in the number of people walking into the emergency room who can't pay, but we're seeing an increase in people who have health insurance with high deductibles and can't afford to pay those deductibles," he said. "They come in and say, 'I've got a $2,500 annual deductible. I know I have cancer, but I can't make this payment.' "

Many hospitals are trying to hang on by dropping or reducing service lines. Pediatrics, obstetrics and psychiatric wards are common targets, and many hospitals are reducing emergency-room capacity.

Hospitals nationwide also are laying off workers, recording more mass layoffs in 2008 than in any other year in a decade, government figures show.

Hospital layoffs hurt patient care, said Rose Ann DeMoro, executive director of the California Nurses Assn. She said hospital systems also were beginning to ask for concessions, such as cuts in retirement and sick leave benefits, from organized labor.

"There's been a crisis for quite a while, but it's escalating with the downturn of the economy at a very rapid rate," DeMoro said. "What the nurses see is that it is tragic in the lives of patients and their families."


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