Healthcare Technology Featured Article

November 09, 2011

Survey Shows Smaller Community Hospitals Getting Slammed Hardest


It’s probably not a surprise to anyone but a recent survey by a healthcare IT company has shown that a majority of community hospitals face extreme financial challenges due to rising costs, low operating margins and reduced Medicare/Medicaid reimbursements. The survey, announced today, was run by Anthelio, a provider of healthcare IT services and business process solutions for hospitals and other healthcare providers, according to a company press release at businesswire.com.

The survey’s goal was to measure the financial health of community and rural hospitals and was completed with Community Hospital 100. Community Hospital 100 offers learning and relationship-building opportunities for community hospital and system executives. The survey received responses from 60 community hospitals, according to a story by Bob Herman.

The survey found that almost 50 percent of community hospitals work with operating margins of less than 2 percent, Herman writes, adding that the survey also found that “about 23 percent of respondents said they have an operating margin, excluding investment income, of 4 percent of higher, while 22 percent reported they are currently running with negative operating margins.”

Almost 75 percent of the total registered hospitals in the U.S. have 300 beds or less, according to the press release. Community hospitals account for the largest sector of the U.S. healthcare system. The survey was set up to look into the financial health of community hospitals nationwide and what effect this has on their ability to meet new quality and performance enhancement requirements.

A story by Bill Hethcock at Dallas-based bizjournals.com, noted that these smaller hospitals are primarily the ones getting slammed by rising costs and less cash on hand.

Only 23 percent of those surveyed reported operating margins over 4 percent, the press release reports and almost 35 percent of community hospitals surveyed “reported that operating costs have increased by more than 5 percent during the past three years, and 60 percent report that operating costs have increased more than 3 percent during the past three years,” according to the press release. Half of all community hospitals reported Medicare and Medicaid reimbursements slipping almost $3 million, according to the press release.

On top of all this, community hospitals face decreasing Medicare and Medicaid reimbursement, with 14 percent reporting reimbursement reductions of over $10 million, 33 percent with decreases of over $5 million, 67 percent with reductions less than $5 million; and 50 percent reported reductions of under $3 million.

An additional challenge is how much cash community hospitals have on hand. According to the survey, “23 percent have under 60 days cash on hand and 12 percent have under 30 days cash on hand, although 67 percent have over 80 days cash on hand,” the press release reports.

But there are solutions out there, according to the press release, such as electronic medical record (EMR) Implementations, although almost 70 percent of community hospitals have started their EMR implementations, with 39 percent spending over $8 million on their EMR implementations; converting to the International Classification of Disease (ICD-10-CM), which is used to code and classify death data from the inpatient and outpatient records, physician offices, and National Center for Health Statistics surveys. Although 95 percent of community hospitals have begun the ICD-9/4010 to ICD-10/5010 conversion process, only 24 percent are actually currently working it through.

Another way for community hospitals to improve their financial situations, the survey found, was Health Information Exchanges (HIEs).  According to the press release, respondents “expressed a surprisingly strong interest in participating in HIEs, with 43 percent saying that they are participating in an HIE, plus another 28 percent saying they are not participating, but would like to,” according to the press release. Only 29 percent said that they are not interested in HIE participation.

“The results of this survey indicate that community hospitals today face unprecedented operational and financial challenges that are exacerbated by rising costs and lower reimbursement rates,” said Rick Kneipper, chief strategy and innovation officer of Anthelio, in the press release. “These challenges threaten to negatively impact patient care and satisfaction, and stifle the innovation we need to make better use of technology and re-engineered business processes to streamline operations, improve top-line and bottom-line so that community hospitals can refocus their resources on maximizing patient care.”



Deborah DiSesa Hirsch is an award-winning health and technology writer who has worked for newspapers, magazines and IBM in her 20-year career. To read more of her articles, please visit her columnist page.

Edited by Jennifer Russell
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