Downturn hits Md. hospitals hard

March 27, 2009|By Stephanie Desmon | Stephanie Desmon,

The economic crisis is taking its toll on Maryland hospitals: A report released Thursday shows that 34 of the state's 58 hospitals lost a total of $466 million during the fourth quarter of 2008 and, officials said, the picture has continued to be grim in the first months of this year.

The Maryland Hospital Association, which compiled the data, said hospital finances in the state have slid to "unprecedented low levels," far worse than hospitals nationwide. The fourth-quarter loss was 10 times that for the same period in 2007, the association said.

The hospitals are still able to pay their bills. Their health care operations were, overall, more profitable than the year before. But investment losses hit many hospitals hard and - in glaring cases - larger hospitals were hammered when financial arrangements intended to protect them from interest rate increases led to sharp losses when rates dropped.

Another hit is coming from money paid to doctors - $210 million in 2008, more than double the cost of five years earlier - to keep them on staff. Hospitals say the spending is necessary to counteract cuts in federal reimbursement to physicians.

"There is no question these non-operating losses are putting more pressure on them," said Robert Murray, executive director of the Maryland Health Services Cost Review Commission, the state agency that sets the rates that hospitals can charge. Still, he said, "They're turning a profit and a quite healthy one."

But hospitals say the overall losses are forcing them to lay off employees, implement hiring freezes and make administrative cuts.

Some hospitals are reporting a decrease in the number of patients being admitted, as people put off elective surgeries such as cosmetic procedures or hip or knee replacements. Some cannot afford them in the economic downturn. Others are afraid to take time off from work, fearing that they might lose their jobs while on leave.

"Health care is not recession-proof," said Raymond Grahe, chief financial officer of Washington County Health System in Hagerstown, which is seeing noticeably fewer patients admitted to the hospital. The hospital is making $4.5 million in cuts and might have to go further if the trend continues.

"We have to be careful that we don't cut into the muscle and the bone of an industry that could help bring this state out of its economic doldrums," Grahe said.

The number of patients being admitted to Frederick Memorial Hospital is down by 5 percent. "People are deferring care, and when they come to us ... they're sicker," said Tom Kleinhanzl, president and CEO of the hospital. Its total profit year to year was down $19 million, according to the report.

Meanwhile, patients are more likely to be uninsured - and unable to pay for the treatment they receive.

"People are unfortunately losing their jobs and losing their health insurance," said Carmela Coyle, president and CEO of the hospital association. "At the same time, the safety net is challenged."

Maryland Hospital Association spokeswoman Nancy Fiedler said that, for the most part, hospital cuts have not had a major impact on patient care but, "If the numbers continue to go in this direction ... we're going to have to see layoffs in patient care."

Not all institutions are being affected equally by the financial meltdown, though the trend is downward for nearly all of the state's hospitals. The total profit margin at Johns Hopkins Hospital was 3.8 percent in the fourth quarter of 2008. At the University of Maryland Medical Center, the fourth-quarter profit margin was a negative 77.3 percent.

According to their financial statements, in the last half of 2008, Hopkins and University of Maryland Medical Center had to write off large sums from financial arrangements in which they had expected interest rates to rise, with Maryland's loss more than $100 million. Anne Arundel Medical Center had to write off $61 million in the period.

Murray, of the cost review commission, said the hospitals might have to look more carefully at the amount they are paying to doctors beyond what the state covers. Such extra payments went up nearly $70 million last year to $210 million, the hospital association said.

Doctors request the extra pay because they "feel as though they're getting lower reimbursements than they would like to maintain their standard of living," Murray said.

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