KNOWLEDGE LINK
Benton: Financial health of America's hospitals in
critical condition in evolving health-care economy

With a newly published purchasing textbook and an endowed professorship in management, W.C. Benton at first glance might appear to be a classic business scholar.

Yet, he demonstrates concern for the plight of uninsured populations and his research in health-care management cuts across many disciplines. It delves into federal and state policy, bio-health and life sciences and social issues such as providing medical care for the unemployed and poor.

“It’s an exciting area to work in,” said Benton, who was named the Edwin D. Dodd Professor of Management last November. “It’s overwhelming too.”

W.C. BentonHospitals, pharmaceutical companies, government agencies, physician partnerships, insurance companies and group purchasing organizations are a sampling of organizations that Benton examines in his research.

A recently published article on hospital profitability that Benton co-authored with local physicians Drs. Thomas E. Williams and Sarah Greenberger paints a dismal picture of the economics of medicine and health-care.

“The low levels of profitability suggest that the current hospital business model is flawed,” according to the article published by the American College of Physician Executives. “The new economics of the health-care industry cannot be managed under traditional health-care systems approaches. The current hospital business model is simply not sustainable.”

Benton believes the health-care business is in critical condition, particularly hospitals. “We were looking at the best hospitals and they only have a two-percent price structure,” he said about the study. The article can be found online at www.acpe.org/ Publications/LeadingEdge/2006/Fall/benton.htm.

Compounding the crisis is a new Medicare patient reclassification that came out last October. The federal government plans to reclassify patients depending on the severity of their conditions, replacing its 20-year-old system of categories with 861 new ones. Medicare currently pays more than $125 billion a year to more than 5,000 hospitals. “A lot of hospitals are going to go out of business because they won’t be able to compete. The pressure of the new pricing structure will be too much given the fact they have too much overhead already,” he said.

In response to economic pressures, a lot of hospitals are transforming into specialty hospitals, Benton said. The new government pricing structure is accelerating that trend.

“The hospitals have to become more efficient to meet that target price. That’s where the problem is. People (doctors and hospital executives) want to work on the profitable procedures and not the unprofitable ones,” Benton said, adding that he predicts a lot of traditional hospitals will be forced out of business. “It would take a lot for them to get to a lean size in order for them to compete with specialty hospitals.”

Benton said he is very concerned about what that means for patients, especially the uninsured, poor and children.

“The question is: ‘what is going to be the disposition of the patient when all of this happens?’ Where are they going to go?” he asked.