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Hospital Finance |
PROLOGUE
Hospital Finance
PROLOGUE: Bradley Strunk and colleagues recently reported in Health Affairs (Web exclusive, 26 September 2001) that hospital care had surpassed drugs as the key driver in health costs. This finding probably comes as a great relief to pharmaceutical executives, as their industry has come under increasing scrutiny from consumer groups and policymakers, even as economists have defended drug prices on cost-benefit grounds. On the other side of that coin we find hospital executives, who may find themselves once again in the hot seat after a decade-long struggle with a managed care industry once described by Uwe Reinhardt as "obsessed with gutting the hospital."
Cost cutters may want to consider their next target carefully, however, as a growing number of researchers and advocates are warning of health risks associated with the continued erosion of the traditional U.S. safety net. Moreover, our recent experience with terrorism underscores the importance of a vigorous and well-funded public health establishment, in which hospitals are key players.
The papers that follow paint a picture of a struggling hospital industry whose fortunes are sensitive to the whims of investors, perhaps more than most observers realize. In the lead essay University of California, Berkeley, professor Jamie Robinson observes that high investor confidence in for-profit hospitals and sagging bond ratings for public hospitals suggest that the former will find it much easier to make capital improvements in the near term. The twist is that for-profits still have to guard against the temptation to overexpand, while weak bond ratings may actually enable public institutions to focus on and improve core operations. Mark Harrison and Cecilia Montalvo, of Shattuck Hammond Partners in San Francisco, present recently compiled data on the financial health of California hospitals. They report that California hospitals are being hit simultaneously by stiff regulatory challenges and a declining ability to attract funds in financial markets, a situation that could portend hospital closures. Finally, United Hospital Fund analysts Sharon Salit, Steven Fass, and Mark Nowak explore the financial health of New York City hospitals and find, again, that they are struggling to meet the demands of a challenging environment.
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