Half of Nation's Hospitals Unprofitable According to Study

Thompson Reuters study analyzes financial data from U.S. hospitals of all sizes and structures and sees the kind of negative impact mirrored elsewhere in the broader recession. Lows are historically unprecedented.

Approximately half of all hospitals in America are in the red, reflecting lows not seen before in history. This is just one of the conclusions found in a study conducted by Thompson Reuters on 439 hospitals across the United States. "Driven largely by a decline in non-operating revenues, financial strains are apparent in all types of hospitals - small, medium and large community hospitals, teaching hospitals and major teaching hospitals," the company stated in its press release. In the third quarter of 2008 roughly 50 percent of the hospitals studied were unprofitable - and declines in elective procedures was partly to blame, a clear link to the recession's impact on discretionary spending. Citing the Thompson Reuters release, "Hospitals are facing unprecedented economic stress and many of the indicators we're seeing suggest that things will get worse before they get better," said Gary Pickens, chief research officer for the Healthcare business of Thomson Reuters and lead author of the study. "While operating margins are generally holding steady, non-operating margins have all but disappeared from hospital balance sheets. That makes it difficult for hospitals to secure financing for new equipment and to fund expansion efforts." In 2004, the American Hospital Association claimed that 25 percent of the nation's hospitals were losing money - a figure also backed by Moody's Investor Service. South Florida hospitals reported a 17 percent increase in profit in 2007. “There is a school of thought that says health care is recession-proof. A bad economy doesn’t prevent people from getting sick,” said Linda Quick, president of the South Florida Hospital and Healthcare Association in an August 2008 report in South Florida Business Journal. “The same goes for health care employment. Because of the aging of the baby boomer population, the need for them won’t decrease anytime soon.” It seems that this thinking is no longer accurate. "The key metrics we're watching most closely right now are operating margins and frequency of elective procedures," Pickens added. "If they start to slip, it may usher in a host of contagion effects."