Dive Brief:
- In theory, the Affordable Care Act was supposed to help providers by cutting overall healthcare costs, increasing the number of people with health insurance coverage and expanding Medicaid. But in states like Virginia, where Medicaid has not been expanded, hospitals are in trouble, according to a new report from the Virginia Hospital and Healthcare Association.
- In 2012, the state's hospitals provided over $600 million in charity care, saw shortfalls of $339 million in Medicaid services and lost $578 million on Medicare services with under-reimbursement, as well as taking on $454 million in bad debt expenses, the report concludes. While some hospitals have caught up a bit since 2012, most are suffering.
- To survive, Virginia hospitals are engaging in a range of cost cutting approaches, from eliminating administrative positions and tightening budgets to revising maintenance schedules and possibly canceling capital projects. Entire facilities may be on the chopping block next, says hospital association CEO Sean Connaughton.
Dive Insight:
Hospitals in Virginia aren't just making cuts, they are bleeding red ink. For example, consider Mary Washington Healthcare in Fredericksburg, which lost $22 million in 2012 and $8 million in 2013. While last year's number is a $13-million improvement over 2012, it's still a substantial loss, especially for a hospital that has been very profitable historically, according to president and CEO Fred Rankin. And there have been consequences to the shortfall. Rankin notes that just a few weeks ago, the hospital laid off people, cut back hours for another 150 people and eliminated another 250 to 300 jobs.
They're also changing the way they operate on a fundamental level. For example, Rankin notes, Mary Washington has had to look hard at which service lines are sustainable. In response, one step it took was to get out of the pediatric mental health business, focusing instead on adolescents. Also, the hospital now goes into a very detailed analysis of the costs and benefits when a doctor wants to bring a new procedure into the hospital.
It's not that hospital leaders are despairing. Even struggling facilities agree that the industry will eventually find an equilibrium under which hospitals can operate, though it may take awhile. But they also agree that staying afloat financially is likely to be extremely tough for the near future.