The other problem is regarding third party reimbursements and state regulators which have had a significant effect on hospitals during the last ten years. Another factor that is brought out by the study is that during both 1983 and 1986 there were important variations in the inpatient reimbursement system that helped in improving the operating and final margins of hospitals. At the same time there are the health insurance companies who provide a large portion of the funds to hospitals are continually on the look out for reducing payment amounts. There are methods through which this is done and one of that is changing from inpatient settings to ambulatory surgery. Another set of problems come from settlements with labor unions. As an example a major portion of the health care providers were affected due to the settlement with Local 1199. This settlement also created similar effects in other areas of the state. The result of these settlements was to resume pension contributions and bonuses within a 12-month period of the ending of the contract.
The problem here is wages have to be increased for occupations where the positions are scarce in the market. There is a continuous shortage of nurses, therapists and technicians and the shortage is likely to continue later also. This only results in the hospitals being compelled to pay for the staff at market rates or it is unlikely that they will get people for their positions. While it is important to evaluate the ability of hospitals as going concerns also depend on the market share that they have, which may not be so important for other businesses. This has to be viewed in the light of the fact that many hospitals have a monopoly on the market in their area, but is not likely to continue as going concerns for very long. In some other areas there are many hospitals which compete for a share of the market. There are also communities which are not able to provide enough patients for a hospital. The condition of these hospitals has to be judged by the government based on the situation there, and in the cases of rural hospitals, there may never be enough patients. In many cases even the community has agreed to underwrite the losses that have been incurred by the hospital. (Donoghue, 1990) Thus even though the hospital may be seen to be having trouble the correct view can be taken only with a competitive view.
Sometimes the funding institutions themselves are in trouble as is the situation with the Catholic Charities USA which provides some $2.3 billion for the purpose of health care. At the same time, being religious does not provide knowledge of finance as Business Week reported for late Cardinal John O'Connor "though beloved by his flock, had a reputation for being a terrible financial administrator. He was ill at ease with wealthy donors who could have pumped up Church coffers. Yet he loved to bail out money-losing schools and parishes, and blew through virtually the entire endowment." (Brennan, 2002)
At the same time thee are strategies that may be used for easing financial pressure and in one case Newark Beth Israel has tied up with financially stronger hospitals through a tie up with the St. Barnabas system. There are also programs like NJKidCare which helps provide for uninsured patients as also University Health Systems. It may be beneficial to change to compulsory Medicaid managed care as this has grown well from the time of its launch in 1995. This program is now covering 95% of the beneficiaries who are found eligible by the welfare program of the state. This is helping the hospitals save $400 million in New Jersey. (Lesser; Gaylin; Andersen; Brown, 1999)
Thus in general one can say that with a clear understanding of finance, the problems of the hospital can be solved, except if some other cases had occurred. There was Allegheny Health Education and Research Foundation in Philadelphia with a few nonprofit teaching hospitals, two medical schools and a total of 600 physicians. This was paying its CEO a sum of $1.2 million a year, but could not pay its debts, and the hospital gradually lost all financing from Medicaid and Medicare. At the end it declared bankruptcy in 1998 and its assets were purchased at very low rates by Tenet Healthcare. The company left unpaid debts of more than $500 million, after using $100 million that were in endowments for other purposes. (Trouble at Teaching Hospitals)
It is not known whether the hospital has this problem, but even otherwise there are problems in managing hospitals as was seen by John Rostill who took over Worcestershire Acute Hospitals NHS Trust. He knew it as a challenge, but this year the trust reported that it was £25m in debt. This is an increase by £15m deficit during Mr. Rostill's first year in power as it owed £10m in the previous year. The CEO claimed that the large debt is not only for the trust but exists for all healthcare organizations in the country. (Challenge of being chief of the hospitals) Thus it is clear that we all know what the problem apparently is, but it requires a much greater study and analysis before taking any decisions.
Retrieved from http://www.newsmax.com/archives/articles/2002/4/11/212641.shtml Accessed on 27 June, 2005
"Challenge of being chief of the hospitals" Retrieved from http://www.thisisworcester.co.uk/worcestershire/worcester/news/WEN_NEWS_FEATURES_COUNTY9.html Accessed on 27 June, 2005
Donoghue, Richard J. (December, 1990) "Evaluation of hospitals as entities able to continue as going concerns" The CPA Journal. Retrieved from http://www.nysscpa.org/cpajournal/old/09691991.htm Accessed on 27 June, 2005
Dubecki, Larissa. (October 3, 2003) "Hospitals financial health failing" Retrieved from http://www.theage.com.au/articles/2003/10/02/1064988340787.html?from=storyrhs& oneclick=true Accessed on 27 June, 2005
Lesser, Cara S; Gaylin, Daniel S; Andersen, Amy M; Brown, Lawrence D. (Spring 1999)
'Consolidation Continues, Financial Pressures Mount: Northern New Jersey" Community Report. No. 12. Retrieved from http://www.hschange.org/CONTENT/108 / Accessed on 27 June, 2005
"Trouble at Teaching Hospitals" (January, 2000) Retrieved from http://www.afscme.org/publications/health_focus/focus100.htm