Morgan Stanley report suggests hundreds of hospitals are at-risk of closure

Hospitals' financial landscape has shifted
A new study suggests hundreds of hospitals may close.
A new study suggests hundreds of hospitals may close.
Updated: Sep. 5, 2018 at 7:33 PM CDT
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NEW ORLEANS (WVUE) - Hospitals aren’t in short supply in Louisiana, but a report by a leading investment bank and financial services company indicates the state has a number of weak or at-risk hospitals, in terms of potential closure.

Louisiana has more hospitals per capita than most states, and rural areas hold a major share of the state’s hospitals, according to University of New Orleans health care economist Walter Lane. Additionally, the state’s rural areas hold a major share of Louisiana’s hospitals, according Mark Diana, Chair of the Department of Global Health Management and Policy of Tulane University’s School of Public Health.

"Probably half of the hospitals in Louisiana , acute care general hospitals are in rural settings and we’re generally a poorer state and so when you combine those two things it’s very difficult for hospitals, when you add the competitiveness it’s hard for them to survive particularly if they’re on their own,” Diana said.

The Morgan Stanley report, “Hospital X-Ray: Fractured Foot(print)” was based on analysis of data for 6,000 individual hospitals. According to the report, 8 percent -- 450 of the state’s hospitals -- are labeled “at-risk” of potential closure.

Local health policy and economics experts say they are not shocked by the report’s contents.

"The profitability of hospitals as much as anything depends upon your payer mix because private insurers pay a very good amount to hospitals, but Medicare doesn’t cover the cost, they only pay, cover about 85-90 percent of the cost of care,” Lane said.

Diana agreed.

"It’s been an ongoing trend and it’s been going on for a long time of hospitals closing, but it has accelerated,” he said.

Diana had previously delved into the financial health of hospitals in Louisiana before the state embraced Medicaid expansion which added hundreds of thousands of working poor individuals to the government funded insurance program.

"We were looking at whether hospitals in poor financial position were in jeopardy of closing essentially…And a significant number were in jeopardy or in a financially weak position and would potentially be at risk of closure if something didn’t change,” he said.

"We tend to be a largely rural states, so I suspect that some of the criteria that they looked at was if a hospital was small, maybe had you know sort of a low occupancy or lower revenue so some of that may just be demographic driven, really not sure how they came up with the concentration number,” said Paul Salles, President and CEO of the Louisiana Hospital Association.

The LHA said it is not only government reimbursement rates that are affecting hospitals’ bottom line, Salles said, noting commercial and managed care programs' rates are negotiated.

The growing number of surgery centers and other off-site health care facilities are also not helping the nation’s hospitals, Diana said.

"Hospitals are facing a lot more competition from you know, minute clinic, retail clinics, urgent care centers, outpatient clinics, free-standing emergency departments,” Diana said.

According to Lane, the best way for hospitals to avoid closure as “their revenues are being squeezed by Medicare and Medicaid,” is to partner with other hospitals and, “become more efficient.”

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