Healthcare Faces 'Interesting Times'

John Commins, for HealthLeaders Media , January 19, 2009

"The healthcare industry really is a microcosm of the whole U.S. economy, which is in a massive state of flux right now," Masters says. "All you have to do is look at the gyrations of the daily stock market reports to get an idea of the degree of instability that's out there."

The press releases and media accounts of hospital layoffs usually stress that patient care won't be adversely affected, that the laid-off workers usually are in less-critical administrative and environmental positions, rather than front-line medical care providers like nurses or physician-employees. Frankly, that's just public relations fodder.

It's hard to believe that too many hospitals carried excessive staffs before the economy tanked. In this age of hospital-acquired infections, intensive documentation of quality initiatives, Medicare/Medicaid paperwork mazes, and RAC audits, please don't suggest that cleaning and administrative staffs are non-essential or luxuries. Their diminishing numbers are a clear signal that hospitals are looking at leaner operations in the foreseeable future and we'd better get used to it. In all likelihood there will be more layoffs.

"These are very tough economic times, particularly for organizations that tend to operate at the margins," Masters says. "It's going to be very difficult for them to shield themselves from layoffs. It might not be as bad for them as in on other industries like manufacturing, but there is no perfect indemnity for avoiding the economic problems we face today."

Of course, while the healthcare industry is resilient, it isn't immune to the realities of a sputtering economy. But it's not like the widget industry, where workers get axed when nobody buys the widgets. Tough times mean private-paying patients will delay elective care. But people will still get sick and they'll still need care, and some will need hospitalization. Someone will have to provide that care. It will cost money. The only thing that isn't a guarantee is payment.

Rising unemployment means more workers will lose their employer-sponsored healthcare. It means an increase in lower-paying Medicare and Medicaid patients, and in charity care and bad debt. Credit markets are locked down, which makes the cost of borrowing money for capital projects and other obligations prohibitively expensive. Nonprofit hospitals face reduced support from cash-strapped governments. For-profit hospitals could see property tax hikes.

And any economic woes a hospital feels will likely reverberate in the community it serves, because hospitals are often the largest employers in their communities, exacerbating the problems for the community, the local government, and the hospital. A hospital that lays off 30 workers in a small community might someday provide charity care for those workers and their families.

Is there any other industry where the overall demand for services remains more or less constant, where the demand for workers remains acute, yet there are layoffs and buckets of red ink?

Interesting times, indeed!

John Commins is the human resources and community and rural hospitals editor with HealthLeaders Media. He can be reached at
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