Inpatient care: models, outcomes, and clinical management

Inpatient Care

According to the Centers for Medicare and Medicaid Services, total health-care spending in the United States will reach $4.3 trillion by 2017, nearly double the spending in 2007. This would represent nearly 20% of gross domestic product (Zhang, 2008). Also, according to Zhang, Medicare spending is expected to grow to $844 billion in 2017, up from $427 billion in 2007. One of the major factors driving the increase is the aging baby-boom generation.

While most industries would expect this type of increase in demand to be a boon for profitability, hospitals are confronting a number of pressures on profit margins which average only 4% in the United States (Half of NY hospitals lost money, made little in '06, 2008).

Increasing operating expenses, particularly bad debt and labor-related expenses are to blame. Due to the large number of uninsured on underinsured, bad debt levels have averaged around 10% in recent years (Moore, 2006).

How hospitals perform in the future is not clear. What is evident is that current levels of healthcare spending growth in not sustainable. The government and employers are seeking solutions to this issue. Part of the response has been a new model called consumerism where healthcare decisions and costs are increasingly being shifted to the patient. This does not bode well for the financial health of hospitals because it will force hospitals to be more price competitive and to deal with even greater levels of bad debt as consumers shoulder a greater share of expenses. The current economic downturn will only compound this problem.

Still, there are proposals on the table from presidential candidates for mandatory healthcare insurance, a national health insurance program or increasing the affordability of insurance so that more individuals will purchase it. The successful implementation of any of these policies would provide a better financial outlook for hospitals. However, in the absence of policy change, hospitals can expect lower profit margins or losses in the coming years.