ABSTRACT
As noted in earlier chapters, the cost of healthcare is a signiŠcant concern not only to governments but also to patients and life sciences companies. is is most acutely felt in the hospital operating environment. Hospitals are facing mandates from local and federal governments to reduce operating costs, improve patient safety, reduce budgets, and cut Medicare reimbursements. is is especially true in many hospitals, which are facing a major problem in proŠtability. In the current healthcare operating environment, the Šnancial health of hospitals is showing an alarming trend, as operating margins are shrinking at a rapid rate. In the last three years, the median operating margin of hospitals continued a three-year slide to 1.5% in 2008 compared with 2.1%, 2.5%, and 2.8% in 2007, 2006, and 2005, respectively*: In 2008, 29% of hospitals lost money on operations. Finally, according to new statistics from the American Hospital Association, the nation’s 5,010 nonfederal community hospitals posted a $17 billion overall proŠt in Šscal 2008, down 61% from the previous year, amid a punishing recession that caused a $20.5 billion reversal in hospitals’ investment portfolios.
