Karla Wild

The uncertain financial climate and the pressures of inflation had been most obvious at the gas pump. However, food prices, construction costs, and the expense of products made with petroleum are all skyrocketing. For the healthcare industry and teaching hospitals in particular, these factors are having a significant impact.

At the same time that healthcare institutions are feeling the pinch of economic challenges, they are also facing physician shortages. It's predicted that the shortage of physicians will reach 85,000 by 2020, and some experts project a shortfall of as many as 200,000.¹ When you combine rising healthcare costs with the increasing medical needs of a large aging population and a dwindling supply of physicians, you have what some are calling ideal conditions for "the perfect storm."

CONSEQUENCES OF TODAY'S ECONOMIC CLIMATE

Photo: Getty Images/Mark Edward Atkinson

Healthcare commodity suppliers were experiencing an increase in petroleum-based raw materials such as plastic and latex. As a result, prices for basic medical supplies have more than doubled in some cases.² Supplies affected by the rise in petroleum costs include latex gloves, plastic bedpans, blood bags, and syringes and tubing used for delivering medications to patients. The Health Industry Distributors Association (HIDA) states the production costs of goods containing plastics and resins rose more than 10 percent between 2005 and 2008.³ To put it into perspective, a 200-bed hospital that uses 16,000 gloves per day would have paid $2.70 for a box of 100 latex gloves. Today that hospital might pay $3.50 to $3.80 per box—which equals approximately $46,000 to $64,000 more each year. That's a big hit. Another example: the hundreds of thousands of gowns hospitals use that are made from polypropylene fabrics. Medline Industries, a medical supply company, says the costs for such gowns have risen from 50 cents to 70 cents per gown—a 40 percent increase.

Past research conducted by HIDA notes that courier fuel surcharges more than doubled for airfreight delivery and tripled for ground delivery. How did this affect hospitals? The price of fuel was dramatically increasing the cost of delivery of medical supplies and equipment, as well as the cost of transporting patients and lab specimens. HIDA states that common carriers such as FedEx and UPS have had to add fuel surcharges to their prices. Also affected were the vehicles used by hospitals to transport patients, supplies, and specimens, causing hospitals to rethink the number of trucks, vans, and drivers they could afford. We can expect to see this again.

Another area affecting the budgets of academic institutions is the fluctuation of food prices. The Bureau of Labor Statistics announced the index for finished foods was down 0.2 percent in October after rising 0.2 percent in September. It also reports that finished food prices are up overall by 6.5 percent over the past 12 months.⁴

In the past, the effects of a stormy economy have forced hospitals to impose hiring freezes and tighten staffing policies in an attempt to compensate for the increased expenses. Is there a reasonable alternative to help compensate for these increased expenses and rein in strained budgets?

THE REALITIES OF PHYSICIAN SHORTAGES

We've seen multiple forecasts for a physician shortage in the United States. The forecasts are becoming a reality. According to the Association of American Medical Colleges (AAMC) Center for Workforce Studies, one of every three doctors is over age 55 and is likely to retire by 2020.⁵ At the same time, a study from the Department of Health and Human Services found that the "aging of the baby boomers will drive demand for primary care physicians from 106,000 in 2000 to 147,000 in 2020."⁶

Further complicating the physician supply predicament is that fewer people are choosing healthcare-related careers. A 2005 Academic Medicine study found that only 27 percent of third-year internal medicine residents planned to enter general internal medicine, a fall from 54 percent in 1998.⁷ Additionally, the Health Resources and Services Administration projected that the estimated requirements in 2005 were 95 primary care physicians per 100,000 people and the requirements will increase to 100 primary care physicians per 100,000 people by 2020.⁸ Clearly, the gap between supply and demand in healthcare is becoming much greater. In fact, in Texas, the annual growth rate of the population now exceeds that of physicians in primary care specialties.⁹

Decreased Medicare and Medicaid reimbursements and the costs of medical liability insurance and licensure are like tornadoes in this storm. These threaten physicians' ability to continue to practice. A 2004 study found that financial disincentives (low Medicare reimbursement rates) are cited as the largest barrier to entry into the medical field.¹⁰ Furthermore, a 2005 survey found that liability concerns were affecting the specialist supply and access to high-risk procedures in the state.¹¹ Of the survey respondents, which included physicians in general surgery, neurosurgery, orthopedic surgery, obstetrics/gynecology, emergency medicine, and radiology, 42 percent have reduced or eliminated high-risk procedures altogether, and 50 percent noted that they were likely to do so within two years.