In today’s healthcare climate it’s becoming more challenging for hospitals to remain financially viable. This is especially true for stand-alone, independent hospitals. According to Moody’s researchers, median operating cash-flow margins of 160 surveyed hospital systems dropped from 9.5% in 2016 to 8.1% in 2017. What’s causing the decrease in profitability? Higher labor and supply costs, higher drug costs, and lower reimbursement from commercial and government payers. If you’re a small hospital with a tight budget, then you’ve probably entertained the idea of consolidating with a larger system with hopes of controlling costs and growing margins. But the data suggests that both financially and in terms of patient care, consolidation might not be the ideal solution.
Healthcare is one of the largest employers in the U.S., especially in rural towns. Healthcare, even in times of economic upheaval, has been a job producer, employing medical staff, administrative personnel and facilities services providers.[i] As an employer and as a caretaker for its residents, these hospitals stand as an anchor for the community.
If you feel like there are fewer community hospitals today than there used to be, it’s not just your imagination. Statistics show that in 1975 there were 7,156 hospitals in the U.S.; today that number has fallen to under 5,600 facilities. While the American Hospital Association classifies 4,840 of these as community hospitals, many may still be affiliated with a larger network or system. Very few community hospitals are true standalone, independent facilities. Which begs the question, in an increasingly volatile healthcare marketplace, is further decline in the number of hospitals imminent, and are those standalone independents at risk of becoming obsolete? Let’s take a look.
Merger announcements have dominated recent news in healthcare. Rumors abound that St. Louis-based Ascension Health is considering a merger with Renton, Washington’s Providence St. Joseph Health. Together, they would make the nation’s largest system of hospitals. Merger deals were also announced between Catholic Health Initiatives and Dignity Health, and another between Advocate Health Care and Aurora Health Care. All claim that uniting leads to more efficiency and overall better care. But the results are far from conclusive, and many independent hospitals simply don’t want to be acquired or part of a major merger.
TPC is a leading coalition that has built a distinct regional model based on collective participation and high commitment that has proven successful. TPC has demonstrated steady savings for over 10 years, while also increasing overall value for Members. The financial benefit is typically the leading story, but TPC is so much more.