Recession takes toll on health-care industry

Dr. Mack Bowman, a co-owner of Augusta Heart Associates PA, said he has had to watch expenses very closely to keep his practice in a healthy state.

Between patients delaying surgeries or cutting back on preventative care to avoid co-pays, and with major reforms in health care, private medical practices and hospitals are taking a major hit.


During the economic recovery, the bottom line for many medical businesses continues to be impacted. Many private practices and hospitals are cutting expenses and staff to make ends meet.

Health-care spending in the United States is projected to grow at a historic low of 3.9 percent in 2010, said Dr. Melayne McInnes, an economics professor at the University of South Carolina.

“In past recessions, the health-care sector has been hit with a lag. But in this recession, the health-care sector was hit immediately,” McInnes said. “It looks like the effects are projected to continue. While the rest of the economy may be in recovery, health care is probably not experiencing the benefits of that yet.”

Decreased spending, however, doesn’t mean the share of the economy devoted to the health-care industry is declining, McInnes said.

“Since other spending is decelerating more quickly, we still have health care as an increasing sector of the economy. It’s an increasing portion of federal revenue and, also, as an overall share of the economy,” she said.

The health-care industry, in general, “has enjoyed a very long run of being recession-proof,” said David S. Hefner, executive vice president, clinical affairs, Georgia Health Sciences University and CEO, MCG Health Inc. (DBA as Georgia Health Sciences Medical Center) and Physicians Practice Group.

 “In this extended recession, it’s discovering that it may not apply, both today and tomorrow ... Maybe we’re in for this protracted period of time of stagnant growth or flat growth as the new normal. I think health care is going to see a compression,” Hefner said.

He attributes this to chronic federal and state deficits.

Despite talks about the Affordable Care Act and possible cuts to Medicare and Medicaid, there has been no discussion about reducing benefits for beneficiaries, said James Davis, the president and CEO of University Health Care System.

Under the Affordable Care Act, University would receive $120 million less in the next 10 years, Davis said.

“When that trickles down to a hospital, that means I’m going to have to provide the same services, but they’re going to give me less money to do it. Then, I have to look at my expenses. If you look at (a) typical hospital, 50 percent of their expenses is labor,” Davis said. “We’re all going to have to get to be more efficient at what we do, which means fewer (workers). Some people will say that means massive layoffs in health care. Some are choosing to do that. Overall, I think if you look at a hospital, you’re going to be seeing people being very careful about hiring.”

University Hospital has 2,983 employees. When someone leaves University Health Care System, a committee determines whether the position needs to be filled, he said.

Georgia Health Sciences University, including its health system, recently laid off 1 percent of its workforce and closed open positions. As people leave, they won’t likely be replaced as quickly. Priority is given to direct-care positions, but the institution is looking at ways “to provide support services and overhead with less people,” Hefner said.

It’s a difficult time to own a private practice, said Dr. Mac Bowman, a co-owner of Augusta Heart Associates PA on St. Sebastian Way. While Bowman and his partner have been able to keep their 16 employees, other local physicians have closed their private practices, he said.

“My partner and I, we’re very, very disciplined. We cut the fat, and we don’t waste. We’re very disciplined about expenditures,” Bowman said.

In the last two or three years, Augusta has lost several internal medicine physicians who have gone into other medical systems, particularly the VA Hospital, “rather than having to scuffle to make ends meet,” he said.

Nationwide, physicians are starting to leave private practice, Davis said. They’re selling their practices to hospitals and becoming employed by hospitals or selling to insurance companies and bigger multispecialty groups.

Some physicians have faced significant cutbacks in reimbursement rates. In addition, physicians could face a 29.5 percent cut in Medicare reimbursement by the end of the year, Bowman said.

“I think unless something is done about that, a lot of practices are going to have to do some things differently and look seriously at staff reduction or hours reduction – things that we just haven’t had to do in the past,” Bowman said. “In private practice offices, I think you’re going to see some of that or some practices actually close if that goes into place.”

Center for Primary Care, with six offices in Augusta, Evans and Aiken, has fared well. The medical practice, which has 22 physician partners, opened a new office in Aiken in September, said partner Dr. Phillip Kennedy.

“It hasn’t affected us as much because of the kinds of services that we provide,” Kennedy said. “The government requiring certain aspects of preventative care has helped us tremendously during this economic time because our patients are coming in and receiving those services because their insurance pays for it.”

Center for Primary Care will continue to expand if there’s a demand, he said.

There’s still a demand for medical professionals, said Shanan Glenn, a career services assistant at Augusta Technical College.

“It’s still a good field. There are still jobs out there. We post daily from the different employers in the community,” Glenn said.