Hard times are coming for non-profit hospitals and, in my opinion, particularly for pathology and the clinical lab contained within them (see: Ratings Agencies Go Negative on Not-for-Profit Hospitals for 2014; Their Projections Signal Fewer Resources for Hospital-based Clinical Laboratories) Below is an excerpt from this article:
Tough financial times are ahead for not-for-profit hospitals, according to the projections of multiple rating agencies. Financial analysts attribute this to an extended period of massive and disruptive change. This is not good news for hospital-based clinical laboratory managers and pathology groups. Big Three credit-rating agencies...echoed a common theme in their 2014 outlooks for not-for-profit hospitals, which represent 60% of the nation’s hospitals. Environmental pressures will suppress revenue growth, while fresh cost-cutting measures will become increasingly harder to find....Revenue growth at not-for-profit hospitals will fall to roughly 3% to 3.5% in 2014....This compares to a growth rate of 5.2% in fiscal year 2012.
....Expenses grew faster than revenues for a second year in a row at not-for-profit hospitals....Not-for-profits have struggled to cut costs in an effort to improve margins. At the same time, these hospitals recognize they must reposition themselves in order to succeed in the new value-based reimbursement environment. That means they continue to invest in information technology and to expand physician practices as a source of referrals....Uncertainties following implementation of the Patient Protection and Affordable Care Act (ACA) will present additional challenges for not-for-profit hospitals going forward....Expanding Medicaid rolls will augment patient volumes. However,....,analysts are pessimistic that these increases will be enough to boost profits.
....Many not-for-profit hospitals have already implemented the most easily achievable cost-cutting measures....Now they are looking for options to push cost savings even further. Some strategies being considered include best practice definition and implementation, as well as clinical integration and productivity. However, some organizations will face roadblocks. Inadequate technology capabilities and cultural inability to achieve consensus could impede needed cost-saving initiatives.....The fact that multiple financial rating agencies predict tougher financial times ahead for a large number of not-for-profit hospitals is not good news for the clinical laboratory professionals and pathologists who work in these hospitals. Among other things, it means that medical laboratory budgets will continue to shrink and lab managers will be asked to do more with fewer resources.
When finances get tight, executives of non-profit hospitals tend to target the labs first for cuts. The perception is that the labs can absorb budget reductions without too much pain. This "logic" is based partly on the high degree of automation in the labs as well as the fact that they provide ancillary services without a direct relationship to patient admissions. All this despite the fact that pathology and the labs commonly account for only about five or six percent of the operating budget of most hospitals. This also despite the fact that hospitals will be facing a greater patient load coupled with the deployment of expensive new EHRs. Here's an article that details about the effect of EHRs on hospital budgets (see: EHR Jobs Boom: 8 Hot Health IT Roles). Below, for me, is the key quote from the article:
Electronic health records have fueled a growing career specialty. Consider these in-demand health IT jobs. Electronic Health Records (EHRs) have created a burgeoning genre of health IT jobs. While health IT once accounted for between 5% and 10% of a hospital's IT budget, it now represents 25% to 35%, Kevin Holloran, a director in Standard & Poor's nonprofit healthcare group told Beckers Hospital Review (see: EHRs and Health IT Projects: Are They Battering Hospitals' Financial Profiles?). A large portion of that money goes toward EHRs -- both in terms of technology and people.
So the budget for hospital IT, EHRs specifically, is at least triple what it used to be. This money needs to some from somewhere and the labs will undoubtedly be one of the first stops.