State and local governments are dumping public hospitals

Excerpts from a WSJ article:

Faced with mounting debt and looming costs from the new federal health-care law, many local governments are leaving the hospital business, shedding public facilities that can be the caregiver of last resort...

More than a fifth of the nation's 5,000 hospitals are owned by governments and many are drowning in debt caused by rising health-care costs, a spike in uninsured patients, cuts in Medicare and Medicaid and payments on construction bonds sold in fatter times. Because most public hospitals tend to be solo operations, they don't enjoy the economies of scale, or more generous insurance contracts, which bolster revenue at many larger nonprofit and for-profit systems.

Local officials also predict an expensive future as new requirements—for technology, quality accounting and care coordination—start under the overhaul, which became law in March...

Health-care consultants and financial analysts say the pace of all hospital sales is picking up at a rate not seen since the 1990s, the dawn of managed care. James Burgdorfer, a partner with investment banker Juniper Advisory LLC in Chicago, said most public systems would end in the next two decades because the industry has become too complex for local politicians...

Public and nonprofit hospitals—the latter of which represent three-fifths of all U.S. hospitals and are sometimes affiliated with a religious denomination—can be appealing targets for private operators, which are betting that the new federal law will eventually yield more paying, insured customers...

Most sales include stipulations that the companies keep services, he said. "You've got to provide the array of services that the community expects," he said. "Otherwise you're not going to get the consumers using them.''

Still, skeptics worry that in the hunt for healthy returns, the for-profits will kill expensive programs and close hospitals with poor revenue. Residents in many towns have fretted over the blow to their civic pride and the loss of their history...

Much more at the link.