The economic distress in the United States overall has begun to seep into the healthcare economy, precipitating a marked drop in margins in FY09 versus FY08. While 2007 may stand as a financial high water mark for the industry, conditions spiraled downward in the latter part of 2008 and are not likely to get better for some time. Consider the following recent reports:

"Hospitals will have to more carefully scrutinize programs and services and reassess the costs and benefits in this new environment. They also will have to manage both cash and debt carefully to ensure that their overall financial positions do not deteriorate to the point that they jeopardize their ability to meet cur¬rent and or future community needs."
(The Economic Downturn and Its Impact on Hospitals, American Hospital Association, January 2009, www.aha.org/aha/trendwatch/2009/twjan2009econimpact.pdf)

"Let a hospital die, losing hundreds of jobs and local health care? Or spend hundreds of millions of dollars rebuilding a hospital during the worst financial crisis since the Great Depression? There seems to be no easy answer in the proposed merger of the University of Connecticut Health Center and Hartford Hospital."
("No Easy Answers in Hospital Merger," New Britain Herald, Feb. 6, 2009, www.newbritainherald.com/articles/2009/02/07/news/doc498cfd98cc6d1131422703.txt)

"The economic downturn is hitting hospitals to a degree not seen in past recessions, according to survey by the Wisconsin Hospital Association. The survey of about 85 hospitals for the first nine months of this year found that charity care increased 19.1%, bad debt increased 19.6%, [and] nearly one-third of the hospitals had trouble raising money."
("State Hospital Association Says Economy is Taking a Toll," Journal Sentinel, Dec. 18, 2008)

"There is no doubt that the current economy is placing strain-in some cases, extreme strain-on hospitals. However, paraphrasing Churchill, hospital executives will only double the danger if they turn their backs on it."
("The Financial Health of U.S. Hospitals and Health Systems: Highlights of a Survey by the Healthcare Financial Management Association," HFMA, January 2009)

For additional information on how hospitals are being affected by the current economic situation, and visit HFMA's Healthcare Financial Pulse web site at www.hfma.org/pulse.

Publication Date: Friday, May 01, 2009

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