The Unsustainable Financial Realities of Hospitals

There’s a great blog post up on the Medsphere blog which talks about the challenging financial realities that hospitals are facing today. I especially like this summary list of the unsustainable healthcare business based on a Moody’s analysis of hospitals:

  1. Private insurers did not increase payments to hospitals.
  2. Medicare reduced payments due to federal budget cuts.
  3. Demand for inpatient services declined as outpatient care options rose.
  4. Retail outpatient options now compete with hospital clinics.
  5. Patients with higher copays and deductibles chose not to seek care.
  6. Hospitals are buying up physician practices.
  7. The costs of electronic medical record systems are impacting the bottom line.

As we talk about why healthcare in the US costs so much money, we always talk about programs that will lower the costs of the healthcare we provide. I often point out that while we love to talk about lowering the costs of healthcare, from a hospital perspective that translates to lowering the revenue they generate while keeping their costs the same. This is the real challenge we face in trying to lower the costs of healthcare. There are really large organizations that stand to lose if we lower the cost of healthcare.

The shift to Accountable Care Organizations and Value Based Reimbusement is a step towards dealing with the issue. If done right, these programs allow a hospital organization to get paid a similar amount while lowering the number of patients they see. The concept is good, but when you get into the details it’s much more complicated with a lot of odd incentives. Plus, I think it’s likely not nearly enough to save many of these hospitals that are already struggling. These programs are new and often just lead to the rich hospitals getting richer.

Unfortunately, as the list above shows, the EHR has been a cost pressure as opposed to a cost saver. Long term, the EHR has the potential to really lower costs, but in the interim many hospitals are suffering under the costs associated with EHR.

It’s not a pretty financial picture for most hospitals. What do you see on the horizon that could change this outlook?

About the author

John Lynn

John Lynn

John Lynn is the Founder of, a network of leading Healthcare IT resources. The flagship blog, Healthcare IT Today, contains over 13,000 articles with over half of the articles written by John. These EMR and Healthcare IT related articles have been viewed over 20 million times.

John manages Healthcare IT Central, the leading career Health IT job board. He also organizes the first of its kind conference and community focused on healthcare marketing, Healthcare and IT Marketing Conference, and a healthcare IT conference,, focused on practical healthcare IT innovation. John is an advisor to multiple healthcare IT companies. John is highly involved in social media, and in addition to his blogs can be found on Twitter: @techguy.