The Hospital Credit Crisis: Danger and Opportunity for Hospitalists
Second of a 3-part series on how the economic crisis affects hospitalists
Look at the two Chinese symbols above. The symbol on the left is the symbol for danger. The symbol on the right is the symbol for opportunity. Taken together, they form the Chinese symbol for crisis. Leave it to 5,000 years of Chinese wisdom to perfectly describe the credit crisis now facing hospitals and how it will impact hospitalists.
If you need a little rousting from that warm blanket of security you feel walking down the hospital hallways, then take a look at some recent headlines. On October 15, 2008 The New York Times ran a story titled “Disappearing Credit Forces Hospitals to Delay Improvements.”
On October 27, 2008, Healthleaders magazine, a publication for hospital and healthcare executives, ran a story titled “Dealing with the Credit Conundrum.”
Still comfortable? Here are a few more data points: Universal Health Services’ interest payments alone represent over a fifth of their net income in the last quarter reported. Their Standard and Poors credit rating is BBB- which is just above junk bond status. And they’re the ones doing well. Tenet Healthcare reported a 2nd quarter loss of $13 million and spent $98 million on interest alone. Their credit rating is B, which is well within the junk bond category. Health Management Associates this week announced a drop of 79% in their 3rd quarter profits. Credit rating B+, also junk bond status.
The credit crisis has already arrived for the hospitals. Does that pose a danger for hospitalists? According to the SHM’s 2008 survey, hospitalists are subsidized by their hospitals by an average of $97,000. SHM does not break down this figure by employment type although I would think this would be useful. My guess would be that the subsidy figures for hospital-employed hospitalist subsidies are even higher. The danger is that today’s credit crisis for hospitals will become tomorrow’s subsidy crisis for hospitalists.
Herein lays the opportunity for hospitalist groups of all types to seize this moment and reevaluate their business models with the goal of reducing their dependency on hospital subsidy dollars to sustain their practices. There are some situations where obtaining hospital stipends are totally appropriate, such as providing on-site night coverage or caring for a disproportionate share of indigent patients, but these situations are more the exception than the rule. Focus on finding opportunities and staffing models for your practice that will generate enough profit so that your practice is self-sustaining. Better to view your hospital subsidy as a luxury that your practice could live without if you had to, rather than as a necessity that you need in order to survive. It can be done.
