Now is not a good time for hospital CEOs to wait and see.
While the modern day equivalent of the great depression may be more of a fear than a reality, there seems to be no question that the U.S. is heading for a period of significant economic slowdown that will lurch into recession territory soon enough.
That whistling noise you hear in the background is Main Street walking past the graveyard.
Admittedly, I am no economic sage. Not by any measure. However, my gut instincts, which are more often right than wrong, tell me that this time around too much damage has been wrought – actual and psychological – for our country to escape some major financial potholes that will cost thousands upon thousands of jobs, reduce tax revenue and force the next President into some painful decisions.
Currently, Congress is struggling to strike a compromise with the goal of averting a prolonged credit freeze that would have devastating consequences for the few who created this mess and the hundreds of thousands who had nothing to do with it. It is unlikely any action can forestall a significant slowdown in our economy.
If you are a devotee of supply side economics, you know the trickledown theory. Tax cuts will generate an uptick in economic activity and all socio economic boats will rise as a direct benefit.
Hospital CEOs, let me introduce you to a new version of this trickledown theory.
Frankly, this is not rocket science. When people lose jobs, they also lose their healthcare benefits. Right or wrong, when the goal becomes to hang on to the roof over your family’s head, and to provide food on the table, paying for health insurance slips quickly down the list of bills that must be paid.
As the number of uninsured grows, hospitals will experience higher levels of bad debt. Hospitals that are barely profitable now will slip into red ink within 12 to 18 months. Even the best managed health systems or hospitals will be forced to re-evaluate strategies and ongoing performance.
When the boom-to-bubble oil market slid into a ditch in the mid-1980s, Houston, whose economy was joined at the hip of the price of oil, saw a micro-recession. From oil executives to real estate developers to healthcare workers, pink slips were the order of the day. Oil men drove to the unemployment line in their BMWs and Mercedes. The Houston healthcare segment, which thought itself to be recession proof based on the notion that people do not stop getting sick in bad times, saw declines in admissions and revenue and increases in bad debt.
Those who saw the economic downturn coming and made the hard choices, survived.
This is probably not a time for hospital CEOs to wait and see.
© 2020 John Gregory Self