It’s often said that the health-care industry is immune to recessions. Just because the economy is stumbling doesn’t mean people will stop getting sick, the theory goes. While it’s true that most health-care providers won’t see fewer customers because of the recession, the economic slump creates a more-harrowing operating environment for providers in 2002, industry officials say. For manufacturers, energy is more than just another operating expense. It plays a critical role… As the number of laid-off workers rises and more people are left without health insurance, the hospital industry could end up with more uninsured patients. Already, hospitals in Rhode Island spend about $100 million each year in “free” care for the state’s poor. “You have more people getting laid off, and as health coverage continues to shrink, that’s when it starts to impact the (hospital) industry,” said Howard M. Dulude, senior vice president of the Hospital Association of Rhode Island. Meanwhile the flagging stock market has cut deeply into hospitals’ investment income, which in recent years had been used to offset much of the cost of providing uncompensated care, Dulude said. During fiscal 2001, which ended Sept. 30, many hospitals saw “bad debt” levels climb because patients were paying higher co-payments and deductibles. Collecting that money from individuals, rather than insurers, is more difficult and ultimately leads to higher administrative costs, Dulude said. It’s a trend that is likely to continue, as a growing number of businesses pass along increased health-care costs to employees. “The question is whether, as co-payments and deductibles increase, hospitals and other providers will be able to collect them all,” Dulude said. “I don’t think that’s the case.” The revenue picture, however, has improved slightly for hospitals, mostly from Congress’s approval two years ago of a small reversal in Medicare-reimbursement cuts. That legislation returned about $40 million of the $400 million in Medicare payments to Rhode Island hospitals that were cut by the Balanced Budget Act of 1997. Moreover, the BBA of 1997 is in the final year of its five-year plan to pare Medicare costs, and some of the act’s provisions will expire in September, according to Modern Healthcare magazine. But providers probably shouldn’t expect additional help from public payers. The prospect of any additional rollbacks to the Medicare-reimbursement cuts likely fell victim to other spending priorities as a result of the September 11 terrorist attacks. And at the state level, industry officials hope a budget shortfall won’t cut into Medicaid and other health-care spending. “We’re very concerned that the state may look at some cuts in Rite Care payments,” said Dulude. But as the industry embarks on 2002, much attention will turn to what many officials consider the industry’s biggest problem: a workforce shortage, which already has driven up labor costs. Shortages across Rhode Island’s health-care provider network grew worse in 2001, with registered nurses and other nursing positions among the most in need. The number of vacant nursing positions at the state’s hospitals, for example, grew from around 400 early in the year to closer to 500 by year’s end, according to HARI. Higher labor costs contributed to the industry’s continued financial woes in fiscal 2001: About half of the state’s hospitals still are losing money, including Rhode Island Hospital, which lost about $29 million for the year ended Sept. 30. Industry analysts don’t expect any quick solution to the labor shortages. Ratings firm Fitch IBCA, Duff & Phelps in August cited costs associated with the nursing shortage – particularly the cost of using temporary employment agencies – as a major reason for maintaining its negative outlook for not-for-profit hospital sector. HARI said the hospital industry this year probably would try to recruit additional workers through scholarships and training programs. Industry officials also might seek help in alleviating the workforce shortage from the General Assembly, which approved a loan-forgiveness program for nurses last year. Meanwhile, the state’s nursing-home industry awaits results from a federal pilot project that will rank facilities based on certain aspects of care. CMS will begin collecting data from nursing homes this month and plans to post the results on its Web site in April. In other health-care developments during the past year: Health-insurance premiums continued their precipitous climb, growing by 11.2 percent in 2001 to an average of $4,924 per worker, according to a national survey of 2,800 large and small businesses by consulting firm William M. Mercer. The survey anticipates a 12.7 increase for 2002. That forecast seems to be in line with health-premium increases in Rhode Island. Both Blue Cross & Blue Shield of Rhode Island and UnitedHealthcare in October said average increases should be in the 10-to-15 percent range for 2002. Blue Cross last month announced a new, $2 million study to assess what the state’s health-care demands will look like in five years. The insurer, which has hired two independent research firms to conduct the study, says the effort should identify the steps must be taken to close whatever gap might exist between the future supply and demand for health-care services in Rhode Island. Butler Hospital in October announced plans to lay off 45 employees and cut its outpatient program from 40,000 visits a year to 15,000. The move was blamed on inadequate reimbursements from insurers, which has been a growing complaint among mental-health professionals.
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