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Hospital finances show improvement; mass layoffs decline

Despite ongoing strain in the economy, there are signs that the balance sheets of health care institutions are on the mend.

By Victoria Stagg Elliott — Posted Aug. 11, 2010

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Operating margins at hospitals are getting stronger, according to a pair of reports issued by Standard & Poor's in July. In addition, government statistics indicate the number of mass layoffs by hospitals declined in June.

The S&P report, "U.S. Not-For-Profit Health Care System Fiscal 2009 Ratios Show Moderate Improvement," issued July 26, documented that after a difficult couple of years in the recent recession, the average hospital balance sheet had improved, because those managing these facilities had constrained expenses and tightened the revenue cycle. Hospitals, which frequently depend on investments for a significant proportion of income, also were helped by more signs of life in the stock market.

For the report, S&P analyzed financials on 143 health systems representing 1,250 hospitals. The median operating margin increased to 3% in 2009 from 2.4% in 2008.

But while researchers found more stability in the health care sector, they also expressed concern about issues that remain because of the recent economic downturn. These include decreased patient volumes, rising costs and state Medicaid reimbursement cuts.

"Despite the current stabilization of the sector's financial profile, we still have some concerns about the depth and breadth of the overall rebound in operations and its longer-term sustainability," wrote the authors.

The other S&P report, "U.S. Not-For-Profit Stand-Alone Hospital Sector Performance," issued July 19, made similar conclusions. It analyzed the financials of 180 stand-alone hospitals. Operating margins increased from 1.8% in 2008 to 2.7% in 2009.

Meanwhile, a decline in mass layoffs means that hospitals are no longer on track to beat the pace of 2009, a record-setting year. Mass layoffs are defined as at least 50 people losing their jobs from one company at the same time.

According to Bureau of Labor Statistics data released July 23, nine mass layoffs involving 509 people occurred in June. In May, 13 mass layoffs led to 857 job losses. In the same two months in 2009: 16 mass layoffs in May, 1,338 jobs lost; 13 mass layoffs in June, 1,429 jobs lost.

In 2009 there were 152 mass layoffs with 11,787 people losing their jobs. This included 82 incidents involving 6,888 job losses in the first six months of the year. In the first six months of 2010, there were 76 mass layoffs affecting 5,849 people.

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