Hospitals also feel fiscal pain - Michigan

Healthy systems forced to make tough cuts

Michigan hospitals -- one of the state's leading job providers -- are cutting back.

As they cope with the rising burden of uncompensated care and investment losses, they are postponing projects, laying people off or freezing jobs.

Long-healthy systems, like Royal Oak-based Beaumont Hospitals, are hurting. The system faces a $60-million shortfall and is postponing a big cancer radiation center, freezing jobs and asking executives to take pay cuts.

Equally strong Oakwood Healthcare System of Dearborn may post its first loss since 1999, said Doug Welday, its chief financial officer.

Oakwood has frozen hiring for 120 nonessential jobs. It has also postponed a $26.5-million renovation project to upgrade its Heritage Hospital in Taylor and is delaying computer technology upgrades.

"If Beaumont has to cut back, holy smokes, imagine what that means" for many other hospitals, Welday said. "Hospitals are the economic engines of their communities."

Job freezes and construction delays can have a significant impact on jobs and the economy of a local community, he added.

Problems will only increase if any of the Detroit automakers fails or if Gov. Jennifer Granholm orders cuts in Medicaid spending, hospital leaders have said.

"What we're seeing in southeast Michigan is being played out all across the state," said David Seaman, executive vice president of the Michigan Health & Hospital Association.

Seaman attributed hospital cutbacks to under-reimbursement and losses related to serving the uninsured and Medicare and Medicaid patients.

Investment losses and the nation's credit crunch have stalled hospital construction plans, including those at Beaumont and the Detroit Medical Center.

"I don't see a watershed event with a bunch of hospitals saying they're going out of business, but there's a significant slowdown of new projects," Seaman said.

State's top employer

Hospitals are one of Michigan's leading job providers, edging ahead of auto industry jobs in the last two years.

They employed 215,900 people, with a total of 515,700 jobs in the state's health care industry, generated $36.7 billion in annual taxes and paid out $26.3 billion a year in salaries and benefits, according to a survey released in May by the hospital association and Michigan's two leading physician organizations.

Last year, the state's 146 nonprofit hospitals provided $2.6 billion in free and discounted care, up from $1.6 billion in 2006. They wrote off uncollected patient debts and had to make up for losses from Medicare, Medicaid and uninsured patients.

The credit crunch and investment losses have only added to the problems some hospitals face.

A national survey of 736 hospitals released last month by the American Hospital Association found that 56% of U.S. hospitals are considering or holding off on renovations and 45% are delaying the purchase of equipment. One-third said they had higher interest rate costs on bonds issued for past projects and refinancing. Answering critics who accuse hospitals of plowing too much money into new buildings and equipment, Seaman responded: "There may be too much construction, but patients want the best service, technologies, surroundings and providers."

Not all are cutting

The cutbacks are not universal. Exceptions include the Detroit Medical Center, McLaren Health of Flint and Spectrum Health, Grand Rapids.

"It's business as usual here," said Dennis Krzeminski, senior vice president and chief financial officer of McLaren.

Mike Duggan, CEO of the Detroit Medical Center, said the health system, which teetered on insolvency four years ago, made so many cuts then "that we don't have to cut now." He said DMC will make $30 million this year.

Also continuing is Henry Ford Health System's $300-million West Bloomfield Hospital, to open in the spring, a $523-million children's and women's hospital at U-M and a $250-million children's hospital at Spectrum Health in Grand Rapids.

Some critics worry that the hospitals, such as St. John Health's new Providence Park Hospital in Novi that opened this summer, may not be fully occupied. They're also concerned that new ones will hurt older facilities -- including ones in their own system -- as health systems compete for patients.

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