Recession Hits Hospitals Hard; Cape Regional Not So Hard

PRINCETON — In a recent Herald article, the importance of Cape Regional Medical Center to the local economy was explored. Since the publication of that article the New Jersey Hospital Association (NJHA) released the findings of a survey representing about half of the 72 hospitals in this state.
The survey showed how many of those hospitals are feeling sharp financial pains from the current economic downturn, but Cape Regional, which participated in the survey, might be better off than many.
“This recession has dealt a staggering blow to New Jersey’s hospitals,” said NJHA President and CEO Betsy Ryan in a Feb. 18 release. “It has weakened their finances, drained their cash reserves and forced them to make extremely difficult decisions about job and service cuts. And it’s affecting patients as well, who clearly are struggling with tough choices about their healthcare.”
Some key trends found in the survey include:
• Jobs: 45 percent of hospitals reported layoffs in 2008, 21 percent anticipate 2009 layoffs, 48 percent eliminated vacant positions, and 13 percent have hiring freeze.
• Services: 17 percent of hospitals eliminated services such as clinics and psychiatric care.
• Patients: 60 percent of hospitals reported a decline in elective procedures, 80 percent reported increased charity care, and 76 percent logged more emergency room visits.
• Finances: hospitals’ margins dropped from 3.5 percent in 2007 to negative 4.5 percent in 2008. They experienced a 27 percent drop in cash reserves and over half reported decreased access to capital or more costly capital for improvements.
• Fund raising: 72 percent of hospitals reported a decrease in fund raising and philanthropy.
• Benefits: Like other employers, hospitals reported making significant contributions to under-funded pension funds for employees, with some hospitals paying as much as $19 million to keep these benefits adequately funded.
“Contrary to business myths, hospitals are not immune to an economic downturn,” said NJHA Board Chairman John Gribbin. “Quite the contrary: Hospitals struggle with the same financial difficulties that other employers face – plus they hold the added responsibility of providing an essential public service at a time when a growing number of individuals are in need. Now, more than ever, New Jersey needs the healthcare services and jobs that hospitals provide.”
NJHA Spokesperson Kerry McKean Kelly told the Herald that 24 New Jersey hospitals have shut their doors since 1992 and eight have closed in just the last two years.
She also noted that the charity care hospitals provide is severely under-funded putting a heavier burden on hospitals that serve a higher percentage of disadvantaged patients.
Despite the dire outlook for many of these hospitals, Cape Regional appears to be weathering the recession better than most.
In answering some of the key points from the survey, Cape Regional Spokesman Tom Piratzky told the Herald that the hospital has not laid off workers or implemented a hiring freeze.
“We continue to evaluate each vacant position to determine the need to fill it,” he said.
Piratzky also noted that Cape Regional has not cut any services and does not expect to do so, as other hospitals throughout the state have.
“We continue to see a decline in elective out-patient testing and out-patient surgeries,” he noted. “We are also seeing a slight decline in in-patient admissions.”
As far as Cape Regional’s finances go, Piratzy said the hospital has budgeted to “break-even” this year.
“We had a very slight profit of .7 percent in 2008 and have budgeted to break-even in 2009 due to the economic decline and the decline of elective surgeries and increased number of uninsured and underinsured individuals receiving care,” he said.
In 2007, uninsured patients utilized Cape Regional over 22,000 times. The hospital provided $4.8 million in charity care services in 2007 and only expect $874,044 in charity care subsidies for 2009.
Employee benefits made up 17 percent of the hospital’s total 2008 operating budget and they’ve budgeted for a 10 percent increase this year, Piratzky said.
Piratzky said the hospital’s 2008 fundraising efforts were successful.
“Through the efforts of several dedicated volunteers and board members, the CRMC Foundation successfully completed a $2,120,000 capital campaign,” he noted. “We will continue to solicit philanthropic support from the community for the many worthwhile programs at the Medical Center. It is too early in 2009 to tell if the Medical Center is seeing a decline in contributions.”
Contact Hart at (609) 886-8600 Ext 35 or at: jhart@cmcherald.com