Parallels: Big Steel and the Hospital Industry

Years ago I attended a program which drew parallels between the 1950s steel industry and the hospital industry. After World War II, the U.S. steel industry enjoyed a privileged position. It did not modernize, it did not introduce technology which was being developed in other nations to lower costs and improve quality, and it continued to pay dividends unabated. The failure of steel to recognize that devastating competition usually comes from an unexpected direction coupled with its failure to protect its equity base led to its near demise. Today, the US exports scrap metal which comes back to us from Asia as steel girders and finished goods. We are steel's third world country.

Many hospitals have incurred enormous debts (i.e., through bond issuance), engaged in a multitude of expensive marketing ventures, hired streams of expensive consultants (who generally tell them what they already know), paid extravagant salaries to their top executive staffs and, like the steel industry, failed to protect their capital bases. Whether an individual hospital or a hospital system is not-for-profit or for-profit, the financial pressures are the same: insurers, HMOs, government and employers are driving prices down below the level at which capital impairment occurs. The result is hospitals with fancy lobbies and executive suites and crowded emergency departments which make patients wait for hours before receiving service. The result is hospitals providing substandard services because they lack the volume or local expertise to improve the quality of these services, but are afraid to give them up because of marketing competition (or sometimes, physicians threats). The result is hospitals which disseminate messages that they are interested in caring for those who are basically healthy and that those who have serious expensive diseases should go somewhere else.

Hospitals are not going to be saved by grants, donations, government largesse or union busting. Hospitals will be saved by responsible stewardship and management, by responsible questioning boards of trustees and directors, and by active communities which demand - not grandiose facilities - but competent management of one of their most important assets.

What do you know about your community hospital? What has been the response to your inquiries about its financial health?