America's Hospitals: In Danger or Bouncing Back?

Slide Presentation by Stuart Altman, Ph.D.

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On November 19, 2002, Stuart Altman, Ph.D., made a presentation in a Web-assisted teleconference at Event 1, which was entitled "The Big Picture: Hospitals in a Volatile Healthcare Environment."

This is the text version of Dr. Altman's slide presentation. Select to access the PowerPoint® slides (101 KB).

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The Big Picture: Hospitals in a Volatile Healthcare Environment

Stuart Altman, Ph.D.
Chaikin Professor of National Health Policy
The Florence Heller School of Public Health
Brandeis University

Slide 1

Hospital Margins Not Keeping Up With Spending Growth

Slide 2

Spending Growth Now Dominated by Hospital Services

This slide consists of a bar graph showing the contributions of different types of care to annual increases in medical spending. Overall increased spending on hospital services accounted for: 31% in 1999; 43% in 2000; and 51% in 2001. Prescription drugs accounted for: 35% in 1999; 29% in 2000; and 21% in 2001. Physician services were responsible for: 34% in 1999; 28% in 2000; and 28% in 2001.

Source: Milliman USA Health Cost Index, in Strunk, Gabel and Ginsburg, 2001,Center for Studying Health System Change 2002.

Slide 3

Total Hospital Margins Beginning To Trend Down

This slide contains a bar graph representing total hospital margins as a percentage of revenue for the period 1997-2002. The margins were: 1997, 6.2%; 1998, 4.9%; 1999, 3.5%; 2000, 4.7%; 2001, 4.9%; and for the first 6 months of 2002: 3.9%.

Sources: 1997-2000 Moody's all rating medians, 2001 AHA national hospital indicators survey.

Slide 4

And It's Not Just The Stock Market!

This slide contains a bar graph of the operating margins of US hospitals. Those operating margins were as follows for the 12 month period ending June 30: 2000, 2.50%; 2001, 2.81%; and 2002, 2.60%.

Slide 5

Financial Conditions of Hospitals In Some States Not Doing Well

This is a graph showing average operating margins for hospitals in different states for the year 2000. The margins were: Massachusetts, -4.3%; New Jersey, 0.50%; New York, -2.7%; Pennsylvania, 1.21%; Maryland, 1.0%; West Virginia, 1.05%; and US, 2.50%.

Slide 6

Hospitals Face the Following Dilemma

• Increasing Demand For Services.
  • Increased Inpatient Utilization.
  • Continued Growth in Outpatient Use.
  • Increased ED Use.
• Accelerating Cost of Services.
• But, Inadequate Payment Rates from:
  • Medicaid.
  • Uninsured.
  • Medicare.

Slide 7

Look at Increasing Labor Costs!

This bar graph shows yearly increases in labor costs from 1991-2002. Those increases by year were: 1991, 8.2%; 1993, 3.4%, 1995, 2.4%; 1997, 4.2%; 1999, 2.6%; 2001, 7.6%; and 2002, 8.5% (estimate).

Slide 8

Can We Count on Higher Payments From Private Payers in Future to Bail Out Lower Payments From Government and Increased Number of Uninsured?

• Maybe—
  • Less Pressure From Managed Care.
• But what about—
  • Growth of Specialty Hospitals.
  • New Non-Hospital Delivery Systems that Focus on Well Paying Patients.
  • Increased Patient Cost Sharing Could Reduce Use.

Slide 9

Growing Demand for Emergency Room Visits And The Addition of New Hospitals

Slide 10

Emergency Department Visits 1990-2001

This bar graph provides national estimates of the number of Emergency Department visits by year. The numbers of visits were: 1990, 92 million; 1992, 91 million; 1994, 90 million; 1996, 93 million; 1998, 96 million; 2000, 103 million; and in 2001, 110 million.

Slide 11

Advisory Board—"We Need More Hospitals"

This slide contains a bar graph that gives projections prepared by the Advisory Board on how many more hospitals will be needed by the year 2011 based upon different sets of assumptions. A conservative estimate puts the additional number of hospitals needed at 1,023, a moderate estimate at 2,491 and an aggressive estimate at 4,914.

Current as of June 2003

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Internet Citation:

The Big Picture: Hospitals in a Volatile Healthcare Environment. Slide Presentation by Stuart Altman, at Web-Assisted Teleconference, "America's Hospitals: In Danger or Bouncing Back?" Agency for Healthcare Research and Quality, Rockville, MD. https://www.ahrq.gov/news/ulp/hospital/altmantxt.htm

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