09AMGA.ORG OC TOBER 2018
INDUSTRY INSIGHTS [ ] data + trends + context
Morgan Stanley recently reported that hospitals have been closing at a rate of about 30 a year. Analyzing more than 6,000 private and public hospitals across the country, the investment bank
and financial services company found that 450
of these facilities (8%) were at risk of closure,
with additional 600 organizations (10%) demonstrating weak or poor performance. As Morgan
Stanley defined its value criteria on margins for
earnings before interest and other items, such
as occupancy and revenue, the resulting data
makes clear that nearly 20% of U.S. hospitals
are not operating at the level they should.
Morgan Stanley attributed its alarming results
to a number of potential factors, including having
a competing, high-occupancy facility located
nearby; low capital expenditures; for-profit status;
and having a lower operating efficiency index,
which measures how well a hospital can turn fed-
eral reimbursements into profit. The report also
cited the disrupting factors of new competitors,
such as those in the space of retail health care, as
well as the rise of high-deductible health plans,
rising prices, and uninsured patients. Years of
mergers, acquisitions, and payer-provider vertical
integration, such as the $69 billion joining of CVS
Health and Aetna, are additionally putting profit
pressures on the traditional hospital environment.
Many of these risk factors have become especially threatening to smaller, rural hospitals that
have more difficulty adjusting to the changing
landscape of the industry. Closures in areas such
as these could have a profound impact on access
for patients where healthcare services and
resources are already limited in supply.
In some areas, the situation is dire and does not
show signs of improving. According to the report,
hospitals identified to be the highest “at-risk”
were those found in Texas, Pennsylvania, Tennessee, Louisiana, Kansas, and Oklahoma, and that
in the next 12 to 18 months “closures will enter
the narrative” for even more organizations.
Source: Morgan Stanley. 2018. Hospital X-Ray: Fractured Foot(print).
American Hospital Association. 2018. AHA Hospital Statistics.
Bloomberg. 2018. U. S. Hospitals Shut at 30-a-Year Pace, with No End in
Sight. August 21, 2018.
■ Non-government Not-for-Profit
■ Investor-Owned (For Profit)
■ State and Local Government
Source: Based on AHA Hospital Statistics, 2018 ed.,
Health Forum, an American Association affiliate