Area Hospitals Feeling Pinch in Downturn

It might have a reputation as a growth industry in good times and bad, but that does not mean the health-care sector is immune to the economic troubles affecting other parts of the business world.

In a report to be released today, the Maryland Hospital Association says that income is down and expenses have risen for many of the state's 58 hospitals. The report says 34 hospitals in the state lost a combined $466 million during the last quarter of 2008.

Virginia hospitals are also reporting shortfalls. District hospitals have yet to report results for the final quarter of 2008, but Robert A. Malson, chief executive officer of the District of Columbia Hospital Association, said they, too, are affected by the downturn.

Hospital officials in the three jurisdictions said they are looking closely at expenses and developing plans for cutting costs. Many have already made reductions.

Maryland hospitals are operating 13.5 percent below their overall breakeven point. In Virginia, Chris Bailey, senior vice president at the Virginia Hospital and Healthcare Association, said income is down 24 percent, not counting investment losses. By comparison, hospitals nationally reported a 7.8 percent decline in total margins during the quarter, according to the American Hospital Association.

"I do think there's a misperception that things are okay, when in fact they're not," said Carmela Coyle, president of the Maryland Hospital Association.

In Maryland, the gap in operating expenses, the difference between what is spent and what is earned on patient care, narrowed to 1.5 percent in the fourth quarter, from 2.4 percent in the third.

Coyle said the trend is troubling because it means hospitals' financial cushion is shrinking at a time when more people are turning to emergency rooms for care because they have lost their health insurance.

In Virginia, Bailey said hospitals' "bad debts" -- owed by people who fail to pay their bills -- rose 20 percent in the fourth quarter from the same period in 2007.