Moody's started the bad-news ball rolling last month when it declared that the outlook for nonprofit hospitals remains negative because of political uncertainty over health care reform, probable cuts to Medicare and Medicaid, and the slow economic recovery. Standard & Poor's chimed in that hospitals probably won't be able to sustain the aggressive reductions in operating expenses that allowed some to survive the recession with relatively healthy margins.
Then I read Bob Kehoe's interview with Paul Keckley. "If you're a hospital CEO, you're not sleeping well," says Keckley, who's executive director of the Deloitte Center for Health Solutions. He cited payment cuts that will occur if Congress and the White House don't resolve budget issues before sequestration kicks in; more aggressive contracting by insurers; and new taxes on devices and drugs, among other things.
Keckley's gloomy forecast: "One out of four hospitals is going to be at or near technical insolvency."
What's frustrating is that so much of this is out of the hands of hospital leaders. As S&P referenced, many of you already have sweated bullets finding ways to cut expenses while at the same time improving the quality of the services you provide. You've implemented techniques like Lean and Six Sigma or followed the Malcolm Baldrige National Quality Award criteria to identify work redundancies, ways to make processes more efficient and other opportunities for improvement. We've documented a lot of those efforts in our year-long Fiscal Fitness series.
There was a time not so long ago that health care was legitimately considered a laggard compared with other industries when it came to embracing best-practice business tactics. Report after report lamented the fact that banking, retail, the airlines and even the military far outpaced health care in implementing new technologies and standardizing processes that improved what they did and how they did it.
The excuse was that health care was "different," and however true that might be, the old mindset is changing, and changing fast. Page through any recent issue of H&HN and you'll find plenty of evidence that hospitals are doing their part to transform health care delivery, partnering with physicians and insurers to improve care across the continuum, reducing errors and avoidable readmissions, boosting patient satisfaction, and taking a deep plunge into population health. Our Most Wired issue in July detailed advances hospitals have made in implementing IT. Our Focus on the C-Suite series examines how the job of each member of the leadership team has expanded from a concentration on his or her traditional area of responsibility to a much more sophisticated and integral role in strategic planning. This month's installment on page 40 spotlights four chief information officers.
No doubt about it: Health care is growing up, businesswise. The long debate over reform provided a much-needed kick in the pants, and whether or not the Affordable Care Act survives the outcome of November's elections, the transformation has gained too much momentum to be reversed. But hospital executives can't do it alone. Legislators must recognize their constituents' need for access to decent health care and the harm that would ensue from any overzealous attempt to "reform" Medicare and Medicaid.