Will Hospitals Face Bankruptcy Like GM?

It is almost unimaginable how a giant car company such as General Motors would end up in bankruptcy. However, in the past few months this issue has been in the news. Rumors have been confirmed on Sunday, and a de facto government will takeover. A bankruptcy petition will be filed on Monday 8:00 a.m. according to a source with direct knowledge of the bankruptcy proceedings, CNN reported.

Seeing GM on the brink of bankruptcy and witnessing how Lehman Brothers faded in the limelight, many questions arise as to how other business establishments and institutions stand amidst the global economic crisis. 300,000 of the once in good hands GM employees, in about 12 manufacturing plants, are about to suffer. Hundreds of thousands of workers at auto parts makers and other GM suppliers will have to find another job. If these happen to institutions such as private hospitals or even medical establishments run by the government, what does the future hold for the people in scrub uniforms?

Doctors, dentists, nurses, and many other medical practitioners who depend on their institutions’ health and insurance plans will suddenly be lost. Their families, who are as well dependent on these institutions, will wander in a snap. Why should we think of this, when in fact, big hospitals seem stable? As you can see, some important facilities and services like supplies of medical scrubs and laundry service for these garments, are seldom available. Many of our medical institutions still trail far behind the modernity of others. If GM, the country’s stronghold in auto production, is cutting 40% of its network of 6,000 dealerships and dropping Hummer, Saab, Saturn and Pontiac, what assurance can employees in the health care industry hold?

In just a span of four years, from 2005 to 2009, General Motors reported a $90 Billion loss, and plunged at 19% from its more than 40% share in U.S. market in 1980. Following the filing of bankruptcy, GM stockholders will see their holdings completely gone, and a company debt of $17 billion. What about hospitals?

According to studies, many of hospitals in the U.S. are facing bankruptcy as well. Wall Street Journal, for instance, reported that a study conducted by Alvarez & Marsal restructuring firm, disclosed more than half of the U.S. hospitals aren’t seeing enough patients to provide sufficient revenue to fund operations and are teetering on the brink of insolvency or already are insolvent. Moreover, the researchers found out that more than 2,000 of the nearly 3,900 acute-care hospitals don't make a profit treating patients, and nearly 750 hospitals that do turn a profit still don't have enough to reinvest in improvements or other essential expenditures. The study also found that hospitals' capital expenses are underfunded in the range of $10 billion to $20 billion because they are using these dollars to fund their operations. It also suggested that the trend of hospitals moving into insolvency and filing for bankruptcy will continue.

"Hospitals are also competing with same-day surgery centers and outpatient clinics and all sorts of ways to deliver healthcare," Gerald H. Gline, a bankruptcy attorney, noted. In addition to increased competition, the hospitals are contending with the rising cost of care, decreasing rates of reimbursement from Medicare and Medicaid are down, and an increasing number of uninsured patients. Furthermore, the Journal notes, before the industry can bottom out... more hospitals will have to seek drastic fixes such as mergers or bankruptcy filings to cure their balance sheets.

In the face of economic downturn, municipal hospitals in countries around U.S. are primarily affected. This can be perceived by the growing “Medical Tourism” businesses, with which travelling abroad for healthcare has been widely accepted you’ll see the internet selling them like candies. In fact, custom’s slips include a box asking the traveler if the reason for the travel involves medical care. Now, how do you see the future of those people in white, colored or print scrubs?