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Declining Revenue Streams Strain Medical Centers

Monday August 24, 2009
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People still become sick in a recession, but that hasn’t kept the tough economy from squeezing America’s hospitals, as the decline in nursing job openings indicates.

A report released in April by the American Hospital Association, examining the impact of the nation’s economic crisis on patients, hospitals and communities, found that the proportion of ED patients without insurance rose in early 2009, compared with the same period a year ago. Also, more patient care was being funded by Medicaid or other programs aimed at low-income residents; and fewer patients were seeking inpatient and elective services. Meanwhile, almost half the hospitals responding to the survey reported cutting staff since September 2008; 80% reported cuts in administrative expenses; and many reported cutbacks in subsidized community services such as behavioral health, post-acute care, and patient education.

“Hospitals are walking a tightrope, trying to balance the growing needs of their communities with today’s economic challenges,” AHA President and CEO Rich Umbdenstock said upon release of the report.

Nurse Employment Suffering
Across the nation, that tightrope walk has affected nurse employment in a variety of ways, such as layoffs, hiring or salary freezes, or reductions in benefits. Once-vigorous nurse recruitment efforts have waned in many parts of the country as RNs are hanging onto jobs they would otherwise have left or picking up extra hours to make ends meet.

“As hospitals are eliminating jobs, more older nurses are postponing or even coming out of retirement because they’ve seen their 401(k)s diminish because of the recession and Wall Street, or they’re delaying retirement because their spouses or their partners have lost their jobs and they’re the sole breadwinners. They can’t afford to retire,” says Donna Nickitas, RN, PhD, CNAA, BC, editor of Nursing Economic$, a journal for healthcare leaders.

Cynthia Hopkins, RN, MA, CHCR, nurse recruiter for Salinas Valley Memorial Healthcare System in California, says vacancy rates for nurses are 6% at her facility, compared with 10% two years ago, while applications are up. Not only are nurses trying to return to the workforce, but demand for traveling nurses has dropped, so they now are looking for hospital jobs as well. Meanwhile, nurses who have jobs are staying put. “There are so few jobs available ... no one wants to give up what they have for the unknown,” Hopkins says.

Lately Hopkins’ recruiting expenditures have fallen. “I can hire locally; I’m using hardly any travelers; and I’m not hiring through outside agencies,” she says. Sign-on bonuses, relocation expenses, and temporary housing have fallen by the wayside. “People aren’t even asking me for that now.”

Research findings about the challenges hospitals face have been dramatic. One business analysis, by Thomson Reuters in March, found that half of more than 400 hospitals surveyed were losing money.

Decline in Revenues
The recession is pressuring hospitals in multiple ways, says Jeanette G. Clough, RN, MS, MHA, president and CEO of Mount Auburn Hospital in Cambridge, Mass. Many hospitals have seen a striking drop in volume of elective and outpatient procedures. For instance, in a tight economy, “folks who can put off having a colonoscopy that has a co-pay that can range anywhere from $250 to $500 or more per procedure may try to put that off as long as they can,” she says.

Also, patients who have lost their jobs and health insurance can’t pay their bills — increasing hospitals’ bad debt — or are asking for payment plans, which means it takes longer for cash to come in, she says. The Minnesota Hospital Association has noted that many patients can’t meet deductibles for high-deductible healthcare plans, a growing segment of the insurance market.

Another problem comes in the form of cutbacks in payments from states and federal government, especially in Medicaid and other state-supported programs, says Clough. Government cutbacks have affected disproportionate-share payments that help support charity care, as well as payments that help cover graduate medical education at teaching hospitals.

Meanwhile, the stock market’s decline this past year has gutted investment portfolios. Some hospitals depend on investment returns to cover operating losses; others book a return from the investment in interest income and take that into their operations budget, Clough says. “If you used it for operations, you’re not using it this year because it’s not there.” Philanthropic contributions have also waned — in the AHA survey, 40% of hospitals reported a moderate or significant decrease in philanthropy and charitable contributions.

Cutting Expenses
All this leaves one category to cut: expenses. Hospitals have slashed non-salary expenses, such as advertising, supply and vendor costs, parties, conferences, and travel, Clough says. Capital spending, for items ranging from new imaging technology to furniture, has been put on hold. And many hospitals have cut salary costs with measures such as layoffs, decreased retirement contributions, and reductions in vacation time, bonuses, executive pay, overtime, and outside labor costs. “About the first of the year a lot of hospitals came out with radical plans to reduce,” Clough says.

In St. Louis, the National Nurses Organizing Committee of the California Nurses Association has noted changes in staffing patterns at several local hospitals, says organizer Cindy Loudin. For instance, in one critical care unit, the usual 3-to-1 patient-to-RN ratio sometimes is now 4-to-1, she says. Also, RN positions are being left unfilled, and cutbacks in support staff have shifted duties to RNs.

Susan Hassmiller, RN, PhD, FAAN, senior adviser for nursing at the Robert Wood Johnson Foundation, has heard of the reverse — RNs laid off and tasks reassigned to LPNs and nursing assistants. “Both scenarios are worrisome,” she says. “Medical errors happen every day. That’s what you worry about in times like these.”

The St. Louis nurses also have noted cutbacks in pensions, 401(k) accounts, tuition matching, student loan repayment, and reimbursement for continuing education. Such perks made nurses more willing to work in a difficult environment, Loudin says, and without them some nurses are seeking less intense positions, such as at doctor’s offices. “They don’t want to take that risk anymore,” she says.

Other cutbacks might not seem like much, but changes such as eliminating coffee service can mean nurses have to leave for 15 or 20 minutes to get a cup.

Protecting the Patient
The recently announced merger of the California Nurses Association/NNOC, United American Nurses, and Massachusetts Nurses Association aims in part to enhance RNs’ influence in decisions that might affect patient safety, Loudin says. The goal is for nurses to monitor hospital decision-making, collect data on how those choices affect care, and, if needed, argue on behalf of patients’ interests.

“Even if the economy is tight, does a patient deserve better care when the economy is better?” Loudin says. “We’re asking nurses to take a stand on that.”

Hassmiller notes that many hospitals are working hard to hang on to quality improvement initiatives. “Good hospitals will do everything possible to care for and protect the health of patients. Many are going to great lengths to keep staff,” she says.

It may be exacerbated by cuts in state budgets, on which many nursing schools depend. Despite an existing shortage of nursing faculty, many teaching jobs are frozen. “We already had a bottleneck in the pipeline,” Hassmiller says, and now more nursing students may be turned away than the almost 50,000 reported last year.

The recent tightening of the job market for nurses doesn’t mean the nursing shortage has eased, Hassmiller says. As the economy improves, many nurses will again work only part-time or proceed with retirement. “Nurses are still getting older,” she says. “The shortage is not over.”

Karen Patterson is a freelance writer.

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