Hospitals' Cuts May Grow as States' Budget Woes Linger

John Commins, for HealthLeaders Media , July 6, 2009

Scanlon says Pennsylvania's hospitals have already made "every effort" to reduce expenses and find savings, which means that the only place left to cut is staff. "Hospitals are running out of options," she says. "With hospital total margins solidly in negative territory, reducing staff is moving from the last resort to the only option remaining. This will be devastating for hospitals, their employees, their patients, and the communities they serve."

Pennsylvania isn't the only state that faces the potential for layoffs in the hospital sector because of state-level budget cuts. The Washington-based Center on Budget and Policy Priorities says that at least 48 of the 50 states have had to deal with or are facing budget shortfalls. California is struggling with an unthinkable $24 billion shortfall, and has issued IOUs to creditors.

Looking ahead to 2010, it doesn't get much better. Tax revenues will be down because there is no indication yet that the economy is on the uptick. An anticipated third straight year of declines in state and local sales, income, and property taxes means that something will have to be cut. The cuts will have to come from somewhere, and healthcare—usually in the form of Medicaid funding—is often one of the biggest targets in states' budgets. Brace yourselves.

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John Commins is a senior editor with HealthLeaders Media.

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