Physicians and Hospitals Not Immune To Economic Downturn

The enemy of conventional wisdom is not ideas but the march of events.

John Kenneth Galbraith, 1908-2006, Liberal Economist

For years, the prevailing conventional economic wisdom has been that the health care sector is immune to economic downturns.

Health care costs, the wisdom goes, will always outstrip the GDP. People will continue to age and get sick, and they will continue to frequent doctors offices and hospitals.

Well, this economy has dealt conventional wisdom and inconvenient truth. Hospitals admissions are down about 5% over last year. Hospitals around the country are laying off employees. One of five Americans are not seeking care because of costs. And one of three are not filling or taking prescriptions as prescribed.

Total patient visits to physician offices were down 7.3% in July 2010 from July 2009- the fourth consecutive month physicians have posted a negative growth in visits, according to researchers with the North American offices of Deutsche Bank Securities.


Physician visits in the West were particularly weak in July (with an 8.5% decline) and in the 2nd quarter (with a 9.5% decline). In the South, total market growth for visits was down 7.9% in the South; down 5.1% in the East; and 6.9% in the Midwest.
These declines effect not only physician offices, but lab, imaging centers, and ambulatory surgical and diagnostic centers as well.

For medical practices, there is a pervasive uncertainly about the effect of health reform. keeping a medical practice afloat financially has become the number one issue for members of the Medical Group Management Association in a survey of 1798 group practices. The MGMA survey indicates physician managers see these as the top ten factors associated with reform and declining visits.

1. Operating costs

2. Uncertainty of Medicare reimbursement


3. Selecting and implementing electronic health records

4. Maintaining physician compensation levels


5. Recruiting physicians.

6. Collecting from patients with self-pay, high-deductible health plan or health savings accounts

7. Negotiating contracts with payers

8. Managing teamwork and group dynamics among physicians

9. Modifying physician compensation methodology

10. Participating in CMS' Physician Quality Reporting Initiative, or PQRI.