Faced with mounting debt and looming costs from the new federal health-care law, many local governments are leaving the hospital business, shedding public facilities that can be the caregiver of last resort.
A patient and care giver at Central Peninsula Hospital in Soldotna, Alaska, where the government is considering a partnership with the for-profit LHP Hospital Group of Texas.
Officials in Lauderdale County, Ala., this spring opted to transfer their 91-year-old Eliza Coffee Memorial Hospital and other properties to a for-profit company after struggling to satisfy an angry bond insurer.
Local officials also predict an expensive future as new requirements—for technology, quality accounting and care coordination—start under the overhaul, which became law in March.
Moody's Investors Service said in April that many standalone hospitals won't have the resources to invest in information technology or manage bundled payments well. Many nonprofits have bad credit ratings and in a tight credit market cannot borrow money, either. Meantime, the federal government is expected to cut aid to hospitals.
"We've been hit by that whiplash recently, with industries closing down and the number of insured growing less," said J.D. Mosteller, the attorney for Barnwell County, S.C., which is considering selling its hospital.
The county has raised property taxes in recent years to bolster the hospital, which spends more than $1 million just to pay emergency-room physicians, he said. "We're a county government. We're not set up to run a nursing home or hospital.''
Health-care consultants and financial analysts say the pace of all hospital sales is picking up at a rate not seen since the 1990s, the dawn of managed care. James Burgdorfer, a partner with investment banker Juniper Advisory LLC in Chicago, said most public systems would end in the next two decades because the industry has become too complex for local politicians. "By the nature of their small size, their independence and their political entanglements, they are poorly equipped to survive,'' Mr. Burgdorfer said.
Rhea Fulmer voted for the sale of the Eliza Coffee Memorial Hospital in Lauderdale County, Ala., to a for-profit operator.
During the five-year period that ended Dec. 31, 2009, $52 billion was used to fund hospital mergers and acquisitions of all types, says Irving Levin Associates of Norwalk, Conn., which tracks health-care deals. This amount exceeds by 140% the total amount of capital committed to fund hospital deals announced in the prior five-year period.
In the first half of 2010, there were 25 deals involving 53 hospitals that were bought or merged, for a total of $3.1 billion, according to Levin Associates. If deals continue apace, it would be the busiest time since 2007, when there were 58 deals involving 149 hospitals totaling $9.3 billion.
Still, skeptics worry that in the hunt for healthy returns, the for-profits will kill expensive programs and close hospitals with poor revenue. Residents in many towns have fretted over the blow to their civic pride and the loss of their history.
The nation's public hospitals rose in different ways. Some were built with philanthropic donations and were sick houses for society's poorest. Many in the west and south rose through loans and grants made possibly by the Hill-Burton Act of 1946. In exchange, public hospitals provide a large amount of free and reduced-priced care. Some are academic medical centers. Many suburban and rural public hospitals provide care to all members of the community, rich and poor.
Residents of Kenai Peninsula Borough in Alaska are debating in letters to the local papers and on a radio call-in show a proposed joint venture that would sell more than half of 40-year-old Central Peninsula Hospital in Soldotna to for-profit LHP Hospital Group Inc. of Plano, Texas.
Mayor David Carey is opposed to the move, as are many residents. He worries that LHP may wind up shrinking or closing the 49-bed hospital, forcing residents to travel 150 miles to Anchorage. "Health care is a major economic engine for us. It's the No. 1 employer in the city,'' he said. "The idea that the hospital could be sold again…or even shut down, is unacceptable.''
Ryan Smith, the hospital's CEO, wants to build a cancer center and expand cardiology and a partner would bring needed capital. Mr. Smith, who said the deal's value is about $105 million, said, "Being part of a system could benefit us."
Some counties are looking at Bannock County, Idaho, where residents voted in 2008 to cede control of their 250-bed Portneuf Medical Center, in Pocatello. A foundation now owns 23% of the hospital, while LHP owns 77%. A community benefit board, half chosen by the foundation and half by the company, governs. LHP kicked in $201 million, mostly to finish building a new hospital.
Before the deal, ``not once do I remember [the public hospital] meeting the financial goals that would have allowed us to restructure the hospital,'' said Larry Ghan, a county commissioner. ``The only way we could do it was to go out and find a partner.''
Charlie Wilson, a member of the public hospital authority voted no. ``Our charity care was quite high and our bad debt was high, too,'' he said. The company's ability to make a profit, he said, ``is going to be a struggle for them.''
Welcome to the new world. Time to enact and continue enacting the separation of health and state.
The irony of it all is - this whole healthcare debate is, at its core - a class warfare debate. Haves and not-haves. In the end, the haves will still have more and the not-haves will all still have less. Rather than most having excellent care, all will have mediocre/poor care and those that can afford it will get better care. Hell, it could even be built into job offers in the future - better healthcare plans. So where will it all leave us? More people will be "insured", but at a much greater cost.
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