Continuing 1Q Drops In GDP and Increasing Effects in Healthcare Sector

I recently posted on a WSJ article and Reuter's research paper on the effect of the current recession on hospitals and the healthcare system job growth.   The AHA recently surveyed over 1,000 community hospitals (of the nearly 5,000 to which they sent surveys) seeking information on the recession's effect on the hospital sector.   Similar to the Reuter's paper from last month, the AHA's survey shows significant effects on hospital total margins, operating margins, efforts to reduce costs, capital plans.

Healthcare tends to be recession resistant industry, but "The Great Recession" seems to be taking its toll.  And 1Q 2009 reports of economic contraction is worse then expected.   The Department of Commerce in a report issued this morning said that real GDP decreased at a remarkable annual rate of 6.1% Q1 2009.  In Q4 2008, real GDP decreased 6.3% and .5% in 3Q 2008.   Many economists had expected a 4.7% decline in GDP for the Q1 2009.  This is the worst two quarters in more than 60 years.  Since 1947, the economy “had never contracted by more than 4% for two consecutive quarters,” according to MarketWatch.com.  Three consecutive quarter losses has not occured since 1975.

Of note from the AHA survey summary of hospitals:

• 90 % have taken steps to reduce costs


• 80 % have reduced administrative expenses


• 48 % have reduced staff


• 20 % have reduced services in subsidized service areas


• 58 % have had at least a moderate increase in uninsured ER visits


• 70 % have had at lease a moderate increase in uninsured/Medicaid


• 59 % report at least a moderate decrease in electives


• 55 % report at least a moderate decrease in admissions


• 65 % report at least a moderate decrease in total margin


• 39 % report a significant decrease in total margin


• 57 % report at least a moderate decrease in operating margin


• 43 % expect a negative total margin 1Q 2009 (vs. 26% 1Q 2008)


• 59 % report a at least a moderate decrease days cash on hand


• 77 % are reducing capital spending


• 46 % are scaling back established programs for capital spending


• 54 % have discontinued planned (not started) capital projects


• 65 % have seen increase in physicians seeking "financial support"


• Of these 79% for call or other services; 71% seeking employment
  
  
  

via AHA : Press Release : Economic Downturn Taking Toll on Patients and Communities Hospitals Serve: New Survey Finds.