Exclusive: Survey Finds Hospital Execs Gloomy about Coming Year

Nearly half of hospital executives expect business conditions for the U.S. hospital industry to worsen over the next 12 months, according to the most recent “Hospital Executives” survey commissioned by ITG Market Research. A total of 85% of the executives reported being “very concerned” about how reduced reimbursement rates would affect their facilities’ bottom line in 2012. Nearly one third reported the same level of concern about how President Obama’s healthcare reform would affect their facility’s performance.

Brian Buntz

January 30, 2012

5 Min Read
Exclusive: Survey Finds Hospital Execs Gloomy about Coming Year

Nearly half of hospital executives expect business conditions for the U.S. hospital industry to worsen over the next 12 months, according to the most recent “Hospital Executives” survey commissioned by ITG Market Research. A total of 85% of the executives reported being “very concerned” about how reduced reimbursement rates would affect their facilities’ bottom line in 2012. Nearly one-third reported the same level of concern about how President Obama’s healthcare reform would affect their facilities' performance. Added to that is a sense of overall anxiety about the U.S. economy.

Image courtesy of Flickr user Yogendra174


Some degree of optimism persists, however. Many hospitals, for instance, continue to invest in new technologies. While electronic medical records (EMR) may be the most obvious examples, the study found that many hospitals are making large capital acquisitions such as purchasing robotic assisted surgery systems.

A total of 70% of the executives stated that their hospitals' financial performance in the fourth quarter of 2011 was better than expected. The key phrase here is “better than expected,” said Graeme Christianson, vice president of healthcare market research at ITG in an exclusive interview with MD+DI. It is not necessarily the case that hospitals’ earnings were better than they were a year or two earlier. “But I think part of it is that many of the cuts that were anticipated haven’t happened yet—or hadn’t happened in the fourth quarter of 2011,” Christianson says. “A lot of hospitals had tightened their belts already and looked for ways to eliminate extra cost.”

The survey also found that patient volume continued to be strong in 2011. “Some hospital executives were expecting it to go down more than it did,” Christianson says, explaining that they had feared high unemployment rates in 2011 would lead many people to avoid or put off hospital visits unless absolutely necessary.

The survey indicates that relatively small hospitals are expected to have the most trouble adapting to the changing market conditions. Not surprisingly, one of the more pronounced trends relating to hospitals is consolidation. “There have been a lot of mergers,” Christianson says.

The trend of consolidation of hospitals, private practices, and clinics will likely continue to be a common trend throughout 2012. “Large hospitals and [their] networks are getting even larger, and some of these smaller hospitals are joining or are partnering with other groups to try and get economies of scale,” he says.

This consolidation also increases hospitals’ leverage in negotiations with providers of healthcare-related services and products. A network of ten hospitals, for example, can demand lower prices and more extensive service from device manufacturers.

Hospital executives are adapting to the changing marketplace using a number of strategies, Christianson says. Vendor consolidation is one of the prominent trends. “So rather than having five or six different vendors providing a type of implant, for example, and giving the surgeons a choice between them, they are saying to the manufacturers, ‘We are going to stock two types and you need to submit tenders and we will decide which companies to go with,'” he explains. “They are playing the manufacturers off on each other, and the manufacturers are having to compete on price, obviously, as well as on clinical factors. But a big part of it is going to be price.”

Another strategy to cut costs is capitation. “So they are saying you can continue to provide our hospital with your implant, but we are only going to pay x amount or y amount. So if you can meet that, great, we’ll continue to stock, if not, we’ll use whoever does make that.”

Pay-for-Performance and Accountable Care Initiatives

The study indicated that pay-for-performance and accountable care initiatives are moving forward, but the relatively large hospitals are implementing these programs more aggressively than smaller institutions. “Pay for performance is, in many ways, easier to implement. It has been around a bit longer, so there are more hospitals that claim that they have at least some degree of pay-for-performance in place,” Christianson says. “But accountable care has also grown within the past year in terms of the number of facilities indicating that they are participating.”

Transitioning at least part of their business away from a fee-for-service model could be a challenge for some institutions. A fee-for service model is relatively easy for the hospitals to understand and manage. “Whereas with accountable care and pay-for-performance, suddenly it is not as clear how to improve hospitals’ profits and revenues,” Christianson says. “You might think, well, the solution is to just take better care of patients.” But that is not as easy as a hospital deciding, for instance, that they should try to do more of certain profitable procedures and try to avoid doing other ones. To come up with answers to these questions, hospitals are dedicating a lot of resources determining how to best manage costs. “But it is still something that they are not sure how to do yet,” he says.

Many hospital executives, it seems, are left scratching their heads trying to figure out the best way to move their business forward amid a rapidly changing marketplace. 

A free executive summary titled “Hospital Executives Syndicated Report Series” examines the needs of 100 executives employed at US hospitals in Q4 2011.

Sign up for the QMED & MD+DI Daily newsletter.

You May Also Like