Healthcare is hurtin'

As we posted on our Twitter feed a few weeks ago, despite some national stories touting healthcare as one of the few industries negatively affected by the economy, hospitals and health systems are are getting hit hard. Old school thinking says provider healthcare is fairly unconnected to the overall health of the economy. “No matter the stock market, people still get sick,” was the old saying. And perhaps up until a few years ago, this was for the most part true.

But now, there are two factors that are serving to hit hospitals financially. The first is uniquely related to this particular financial downturn – the freeze of the debt markets. In a dark statement in the current issue of BusinessWeek, Ralph De La Torre, CEO of Caritas Christi Healthcare sums it up well: “We live and die on the tax-free bond market, and right now we’re dying.” Hospitals use the debt markets to raise funds for facilities expansions and upgrades, new technology and acquisitions. With the debt markets frozen, this source of revenue has dried up.

Worse, those organizations who had variable-rate debt have seen their interest rates, and subsequently, their payments, sky-rocket. Locally, the Fairview Health System had to scramble to refinance its debt when faced with large debt payment increases, and other systems are feeling the pain. Today’s Star Tribune paints a depressing financial picture of the local Twin Cities healthcare market in a story by Chen May Yee.

The story also notes the effect of the second factor, this one more long-lasting: the impact of consumer-driven healthcare. With more consumers paying more money out of their pockets through high-deductibles, co-pays and co-insurance, many are delaying or opting out of care in the face of tough economic times. In addition, capturing receivables from consumers is much more difficult for hospitals than receiving reimbursement from payers, resulting in higher levels of bad debt.

What does all of this mean for healthcare marketers? At best, a tightening of budgets and hiring freezes. At worse, layoffs, as we’ve seen throughout the Twin Cities. It doesn’t help that many healthcare leaders don’t understand or value marketing in the first place. And there’s always the natural inclination of business leaders to cut marketing first in the face of bad financial times.

What impact has the economy had on your healthcare organization? Has your department faced cuts in budget or staff, or do you expect cuts in 2009? Our guess is that the majority of healthcare marketers would answer yes to one or both of those questions.