Instead, these hospitals may be avoiding closure by reducing the quality of their services (For public hospitals, there is a strategic alternative: privatization ). The extreme choice for hospitals experiencing financial difficulties is to close down the entire medical facility, which will limit access to care for all patients, although existing evidence shows that many hospitals continue to operate in spite of financial distress. To achieve these goals, hospitals may choose to reduce the number of nurses, increase patient waiting time, postpone investments in new technologies, lower the degree of compliance with standards, or even reduce the use of medical resources. calls for healthcare executives and managers to focus their strategic resources on reducing costs, improving operational efficiency, consolidating supply chain infrastructure, strengthening balance sheet, and avoiding growth strategies. This worsening financial situation has forced hospitals to contain costs and achieve high efficiency. MedPAC’s report to the Congress further predicts that “under current law, payments are projected to decline in 2015 this decline would result in lower margins for all hospitals, including the relatively efficient providers.” (Excerpt from the Report to the Congress: Medicare Payment Policy (March 2014)). These hospitals have been facing rapidly declining incomes and rising labor costs at the same time, and the statistics from the Medicare Payment Advisory Commission (MedPAC) suggest that the aggregate hospital margin have been between −5% and −7% since 2007 and reached −5.4% in 2012. The recent economic downturn has certainly placed additional pressure on the fiscal resources of acute care hospitals in the United States and abroad (See on this subject). For instance, in the quote at the beginning of this article, EMH Regional Medical Center, an Elyria, Ohio-based nonprofit hospital, not only profited from the lucrative heart procedures but also provided good health care services to their patients.įor hospitals with other business models, however, it is a different story. Interestingly, in recent years some hospitals have been performing well in both financial and quality measures. However, there is a growing concern that the profit driven motives of hospitals may do more harm than good to patients, and earlier evidence has shown that a market-based healthcare system sometimes has a deleterious effect on service quality. Many policymakers began to advocate for market-based healthcare systems, in which hospitals have the freedom to set the quantity and quality of service delivery. Since the 1920s policymakers have been concerned with growing health care costs and seeking to contain costs by adopting new regulations to control hospital rate, restrict investment, and limit medical procedures.
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