Healthier Hospitals Provide Substantial Economic Boost

When Governor Tom Wolf announced in January that two state prisons would close, community reaction was remarkably agitated.  Local officials, community groups, and prison workers mounted a full-court press, presenting the advantages of keeping prisons open.   Defenders portrayed grim consequences for short-straw communities suffering a facility closure.
Meanwhile, across Pennsylvania, more than a few health care facilities are on the survival watch-list.  This should be more alarming, because the economic consequences of hospital failures are greater and ripple more extensively through a region.  Yet rarely is comparable energy and advocacy poured into saving hospitals.  Maybe slow decline is more spirit defeating, but still…

Hospitals are big enterprises, large employers, workforce developers, economic contributors, community cornerstones, wrapped in one package.  The numbers contained in last year’s summary of economic impact of hospitals and healthsystems are imposing: $115 billion in impact, over 600,000 jobs provided directly and indirectly, with the trend-lines moving steadily upward.

So what is the problem?  Pretty much the standard Pennsylvania situation, where the overall strengths and benefits mask their uneven distribution.  Too much experience proves hospitals are not too big to fail.  The consequences of failure are outsized.  Media glare tends to focus on mergers of the mega-providers, while the struggles of small and medium-sized facilities are little noticed.

Those who want to paint hospitals as the health care equivalents of uncaring financial institutions are ignoring a significant side of the story.  In recent years, numerous collaborative efforts have been launched with the goal of ensuring patient safety, concentrating on reducing what are called preventable hospital-acquired conditions, as well as costly readmissions.  These steps have been voluntary and compelled, but they are making an important, documented difference.

It seems fundamentally basic – if we want a certified jobs plan in place, keep Pennsylvania’s hospitals healthy.  Yet, in public debates and in the policy proposals in play, the impression is critics hold sway over champions.

This negative slant toward hospitals carries a weighty list of counterproductive implications:

*Struggling hospitals are generally located in urban or rural areas where access to care is a dominant concern.  A closure is difficult for families.  It is even more problematic for employers, those who do business with the hospital and those who rely on the facility for their employee health care.

*Various reports describe performance weaknesses in the aftermath of non-profit hospitals being acquired by for-profit entities.

*Increased exposure of public charities to local taxation is troubling.  Attempting to heal municipal finances by taking a larger chunk out of key institutions has always seemed a doubtful long-term strategy.

*If repealing the Affordable Care Act means ripping up Medicaid expansion, it will be a serious setback for hospitals and other facilities that end up being the places where the uninsured go for treatment, driving up the costs of uncompensated care.

Fortunately, there are available and accessible avenues for shoring up the hospital sector.  At the state level, legislation assisting the expansion of telemedicine will be a vital contribution.  The technology is expensive to acquire, but the biggest hurdle is securing insurance coverage for these services.

Conversely, hospitals can be helped if decisionmakers refrain from imposing unnecessary requirements.  Commentators and legislators are pushing to revive certificate of need review and approval for health care construction and expansion projects.  This was an incredibly time-consuming and resource-draining process that delayed competitive steps and drove up costs.  When the emphasis is on rolling back regulatory intrusion, exhuming CON from the policy graveyard is a perfect illustration of what not to do.

The serious structural deficit in the state budget must be dealt with, putting many spending lines are at risk of reduction or elimination.  Funding for hospitals is not immune.  Nevertheless, short-term savings can carry sizable long-term costs.  Just look at the compound problems confronting higher education institutions to see the inevitable effects when state support is cut back.  While political tides are running toward shrinking state economic assistance and incentive funding, that does not preclude expanding health facility eligibility for available dollars.  As the economic contribution and employment numbers prove, hospitals provide a documented return on investment and trigger the highly-prized multiplier effect.

The acquisition of non-profit hospitals by for-profit corporations has prevented closures.  It has not been as helpful in improving access or stabilizing costs.  There are two ways of addressing the dissatisfaction with this experience.  The first, putting additional barriers in front of such acquisitions, fails to address the circumstances putting hospitals in poor financial condition.  It seems clearly preferable, policy smart, and cost effective to instead remedy the faltering financial health of non-profit facilities.

This is not to give hospitals an entirely clean bill of health on their financial practices.  A good case exists for state legislation that would cure the excesses of surprise charges, for example.

Many times, when spending for institutions is debated, detractors cite problems and contend accountability is lacking.  Pennsylvania years ago created an effective mechanism for spotlighting deficiencies – the Pennsylvania Health Care Cost Containment Council.  Their reports contain comparisons on a wide range of procedures and measures, forcing institutions to determine why numbers are worse than the norm and to figure out how to improve outcomes.  The findings carry weight, for those who utilize hospitals can shop for alternatives if they are unhappy with quality or cost of care.

PHC4 reports verify something else crucial – the significant percentage of Pennsylvania hospitals losing money.

Years ago, Pennsylvania decided for sound fiscal and policy reasons to get out of the business of operating state general hospitals. Now, many state hospitals have been shut as the move toward community placements occurred.  Pennsylvania has been more progressive than other states.  But the inescapable effect is our state depends more heavily on non-profit hospitals and healthsystems.

Again, this argues for a stronger partnership.

Thinking about funding, regulating, and amending the state Constitution in the health care arena needs to be adjusted.  Remove the anti-health care facility bias where it pervades policymaking, and recognize these providers as valuable and indispensable.  Their contributions make a profound difference in health care and in the economy.

A hopeful sign of redirection came in January, when Governor Tom Wolf unveiled an initiative to save rural hospitals, with the jobs and healthcare access they provide.  A clear connection was made between the continuation of hospitals and the future of farming, a stalwart enterprise and hallowed tradition.  Of course, there is a cautionary aspect to the plan – the funding comes from federal dollars.  Domestic spending large and small is a huge question mark under the Trump Administration.

The anti-institution bias rooted in the last recession shows few signs of diminishing.  This provides another contradiction between perception and policy development versus the results people want to see.  It is devilishly difficult to strengthen communities when decisions are conceived from hostility toward cornerstone institutions.  Expecting hospitals to absorb additional costs ranging from uncompensated care to higher taxation, and not increase their financial strains in the doing, is unrealistic.

Read the reports.  Look at the numbers.  Think through the real ramifications of state spending and taxing and regulating policies and practices.  A clearer-eyed view of the contributions and possibilities of hospitals and healthsystems, and a realization of the severe challenges many of these institutions confront, can create a climate for improved health care delivery, employment growth, and economic progress.

David A. Atkinson is an Associate of The Susquehanna Valley Center for Public Policy.

For a thorough analysis of the role of hospitals in Pennsylvania and Pennsylvania’s economy, please see these reports http://www.susvalleypolicy.org/policy_papers_pdf/Hospital-Report-Update-2017.pdf and http://www.susvalleypolicy.org/policy_papers_pdf/Hospital-Policy-Paper-2014.pdf.

Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation.
The views expressed here are those of the author and not necessarily those of The Susquehanna Valley Center.