Continued financial woes for hospitals, study finds
A recent study indicates that the Balanced Budget Refinement Act of 1999 (BBRA) has not quelled many of the financial problems facing the nation’s hospitals. The study, "The Financial State of Hospitals: Post-BBA and Post-BBR" —
conducted by Ernst & Young LLP in Irvine, CA, and HCIA-Sachs LLC in Evanston, IL — shows that despite the passage of the BBRA, U.S. hospitals continue to show declining hospital profit margins. The study used 1999 data in its calculations.
The study found that nationwide total hospital profit margins have significantly fallen from pre-BBA (Balanced Budget Act of 1997) levels. The BBA caused total margins to decline from 5.5% to 2.9% in 1999, with the BBRA providing minimal relief, according to the study. Hospitals are expected to experience their lowest margins since 1984.
Smaller, rural hospitals are in the greatest financial jeopardy. By 2001, hospitals with less than 100 beds are estimated to report profit margins of less than 1%, the study says. By the end of 2004, the end of the five-year scoring window for BBRA, nearly 60% of all hospitals will be losing money, according to a study conducted by the Lewin Group in Falls Church, VA.
"The effect of these two studies cannot be ignored. Many hospitals will likely experience bond downgrades, loss of capital equipment, and a reduction in staff," says Michael Hamilton, partner and national director of Ernst & Young’s Health Care Advisory Business Services.
For a copy of the study visit HCIA’s Web site at http://www.hciasachs.com or Ernst & Young at http://www.ey.com/industry/health.
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