Should hospitals get bail outs?

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A small town hospital in my region is currently trying to pass a vote for a county-wide sales tax to generate revenue for the hospital, “because of decreasing reimbursement”. It’s true that as they get paid progressively less, they find themselves in trouble. But from my perspective, they sold their soul long ago, and now they’re uncomfortable when the devil has come to collect. They became a “Critical Access Hospital,” which means they get Medicare entitlements/subsidies, etc. But with that deal comes infinite red tape and attached strings. Ever-changing goalposts progressively lower payments for their services and wasteful mandates. I have little doubt that they made a couple million extra during the pandemic–money that is long gone; government mandates having caused most of it to be wasted.

In the economic real world, if a business loses revenue, they tighten the belt and come up with better ways to compete in a competitive environment. Adapt or die. But from what I’ve seen, in the “non-profit,” government-subsidized hospital world, the solution has never been a corporate version of “living within your means”, but rather, finding more money/handouts to continue the status quo.  Not that I blame them- they’ve been conditioned this way- most hospital administrators have no real-world business experience, only experience suckling at the teat of corporate and government payers, so they literally don’t know better.

As the money dwindles, so do services. In addition to the normal access problems Americans have in the healthcare system, instead of adding more value in an attempt to increase revenue, small hospitals progressively neuter themselves and water down their care, all the while lamenting the loss of revenue. Mid-level staffed ERs transfer a large percentage of problems to larger hospitals. Indeed, small hospitals are often punished by Medicare if they admit patients who are too sick or not sick enough. They stop OB services, making local moms drive sometimes an hour or more to deliver. 

At least in medicine, cutting your scope and services is no way to address dwindling revenue. A better solution is to 1) Stop spending money/cut overhead  2) Get out of the unhealthy and abusive 3rd party payor relationships 3) Offer a great product at a fair price. But if you were to pitch free market economics in healthcare to a hospital administrator, they look at you like your hair’s on fire. Trust me, I once tried.

I do sympathize with all the money the government forces hospitals to waste. They have to spend a lot of money on JCAHO audits, worthless and fake quality metric reporting, EMR changes and the expensive IT services that go with it, and wasteful box-checking for bureaucratic oversight. Consider a full-time “compliance nurse” whose job includes things like making sure fire extinguishers have been inspected and refrigerators are always the right temperature, etc.  Such things can still be done affordably without a nurse-administrator. Hire a high school kid to do it once a month after school for ten bucks, or better yet, do it yourself. Hospitals begging for tax dollars still buy brand new $10,000 EKG machines–only takes a minute to call your sales rep and place an order. But a healthcare provider of any kind who’s struggling financially gets online, spends some time, and soon gets the same machine used, for $300. Hospitals don’t have to be wasteful, it’s just easier.

Sadly, hospitals won’t change. They’ll keep rearranging chairs on the Titanic until they go under. For our hospital, the sales tax (if it passes) will band-aid the wound for a short time, and keep my many good friends who work there employed a little longer. Without question, they will soon need more, having never fixed the problem.

If they could stop to imagine, then implement a drastic re-build of their business model, I think small hospitals with smart business plans could thrive. They would become much less top-heavy. Instead of admins sitting around in boardrooms eating donuts and fretting about how to comply with the most recent Medicare cut, they could, well, for starters, check the temperature on the fridge.

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About Vance Lassey, MD

Dr. Lassey earned his medical degree from the University of Kansas School of Medicine and completed his residency at the Smoky Hill Family Medicine Program, where he served as the chief resident. He went on to practice rural inpatient, outpatient, emergency room, and obstetric care, in Holton, Kansas. He found the calling he loved to have been hijacked by middlemen. Stuck in a broken system, mired in bureaucracy, clicking boxes, coding, not seeing his family, and hearing patients complain bitterly about medical costs he had no ability to control, Direct Primary Care (DPC) became the solution for him, his family, and his patients. He is passionate about restoring the physician-patient relationship, bringing transparency and sanity to medical costs, and advises physicians around the country on how to get out of the FFS system. He serves as an Assistant Clinical Professor at the University of Kansas School of Medicine, is the recipient of numerous clinical and teaching awards, and is a founding member and the past President of the Direct Primary Care Alliance.