Hospitals are the latest casualties of the economic crisis. As their investment incomes tumble, hospitals' already stretched operating budgets are being squeezed even further. At the same time, they must treat an increasing number of patients who are uninsured or cannot pay their medical bills; recent Obama administration estimates reveal that crushing health care costs trigger a personal bankruptcy every 30 seconds.
So it's not surprising that more than half of the nation's hospitals are operating in the red, according to a recent Thomson Reuters study. Credit rating agencies are downgrading hospitals. Moody's and Fitch recently changed the outlook for the not-for-profit hospital sector from stable to negative. And across the country, hospitals are cutting staff and services; many are being forced to close their doors.
Local hospitals are feeling the pinch. In March, the Maryland Hospital Association released a report that showed average revenue at 58 Maryland hospitals fell short of expenses by nearly 14 percent in the last quarter of 2008 - the worst profit margins reported by the state's hospitals to date.
While health care reform is a top priority for the Obama administration, hospitals need a remedy now. The federal government should step in to make sure that not one hospital fails in this country within the next two years. If some banks are too big to fail, then hospitals are far too critical to a community's health to fail.
But the government can and should only do so much. Hospitals themselves must change from the inside out to become well-run enterprises. By analyzing the millions of day-to-day processes and interactions - from patient admissions to Medicare billings - hospital staff can then implement the changes needed to make their facilities more efficient. Doing so will reduce costly medical errors, save time and, most important, save lives.
Improvements to the seemingly small stuff - the location of supplies, how patients are greeted, color-coding of lab sample containers - can make a huge difference. When everything and everyone are in the right places, then more time, the prized yet elusive asset at every hospital, becomes available for caregivers to really care for patients.
This transformation must take hold in teaching hospitals and medical schools. Nursing students and physician interns must be taught how to adopt the most efficient processes. We need "professors of process" to instill in students that in practicing health care, how is as important as what. The University of Maryland Medical Center (UMM) is an ideal example of a hospital doing just this. By implementing a more efficient process for the turnaround time in the operating room between surgical cases, the hospital was able to reduce patient wait time, decrease staff overtime and increase the number of patients seen during the day shift.
In this new efficiency-driven environment, government must also reward hospitals for being better businesses. Today, the government examines a number of metrics and standards when making Medicare or Medicaid reimbursement decisions. Sadly, how many procedures a hospital performs - not how well it operates - is the main criterion for reimbursement. Efficiency scores must become one of these key metrics. Private health insurers will then adopt similar standards to ensure a systemwide standard of rewarding efficiency.
Lastly, patients have a right to information that clearly tells them where the good hospitals are. We must make an industrywide commitment to complete transparency of hospital performance by posting hospital efficiency, cost and safety data online, for all to see. This can be achieved through required efficiency measurements from the Centers for Medicare and Medicaid Services and the Joint Commission, a nonprofit that accredits and certifies health care organizations. And we must go beyond simply reporting the information. It also has to be shared in a way that is useful so that patients will be better informed and hospitals that provide quality care will be recognized.
While all of this may sound ambitious, hospitals have an advantage over many other businesses: The people who work in them have a passion for care and a unique blend of skills. It is these people who can ensure that hospitals heal themselves and who will set the nation's hospital system on the road to recovery.
Michael Jhin is the CEO emeritus and former president and CEO of St. Luke's Episcopal Healthcare System in Houston. He is executive advisor to the health care practice of a Baltimore-based human performance and process improvement consulting firm. His e-mail is firstname.lastname@example.org.