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Recession takes toll on health-care industry

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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.

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.  SARA CALDWELL/STAFF
SARA CALDWELL/STAFF
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.

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.

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Craig Spinks
817
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Craig Spinks 10/31/11 - 01:29 am
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Everybody should always

Everybody should always "...watch expenses very closely." Prudence and thrift are two character traits in short supply in the contemporary world.

Hopefully, we're at the end of an era characterized by throwing money at every societal problem, medical and otherwise, in anticipation of each's automatic solution. Hopefully, we will have learned our lesson before it will be too late.

augusta citizen
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augusta citizen 10/31/11 - 05:47 am
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Agreed Mr. Spinks. I think

Agreed Mr. Spinks. I think there are many people who are just now realizing how bad the economy really is. By the way, any article that mentions "economic recovery" seems a little out of touch to me, but the media is telling everyone that we're in recovery. Wish I could buy it.

Craig Spinks
817
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Craig Spinks 10/31/11 - 08:11 am
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AC, Our area is better off

AC,

Our area is better off than most. But many of our fellow residents are in economic and economically-related distress. They deserve our helping hands.

On a more theoretical note: Prodigality is not a good long-term solution to any problem. We've seen prodigality in its many forms in our personal lives and in its economic form in our lives as constituents of local, state and national governments as well as customers of corporations. It hasn't worked and won't work.

The philosophy of "More" is as bankrupt as The New York Central Railroad, Lehmann Brothers and Eastern Airlines. The prodigal will continue their pursuit of "more" at their own peril, in a best case scenario. In a worst-case scenario, their lack of mature self-discipline will cost not only the prodigal themselves but also will victimize responsible members of our society.

What does our society need to do to inculcate into the minds of our kids the idea that prodigality brings ruin- before lack of self-discipline brings ruin to them and to the rest of us?

madgerman
236
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madgerman 10/31/11 - 08:25 am
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Strange that countries with
Unpublished

Strange that countries with state run health care systems are not looking for cuts. Even stranger is the fact that if we are so short in doctors why does the AMA try to limit visas for doctors? They sure agreed to open the flood gates for nursing imigrants. I can't recall when the doctors ever agreed to reduce their charges. In fact I believe that the cost of health care has gotten beyond the extreme in the last decade. The writer states that hospitals spend 50% of their budgets on labor. Just how much of that 50% is for doctors salaries? P.S. I understand that university is receiving 120 mil less, why didn't the writer say what they would be receiving?

Willow Bailey
20603
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Willow Bailey 10/31/11 - 08:35 am
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We are a nation drunk on

We are a nation drunk on spending. Our government does not live in reality. It says spend, spend, borrow, borrow, let the peasants pay. Unfortunately, the church (most of them) has backed their philosophy with the same practices. Media puts the top on it with marketing indoctrination that says in order to be important, beautiful, sexy, happy, successful, you have to...spend, spend, borrow, borrow. Who models frugality?

Riverman1
87132
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Riverman1 10/31/11 - 08:51 am
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University Hospital generates

University Hospital generates amazing revenue that is just now starting to be captured instead of it going to the physicians who use the facility. Orangeburg Regional, another county owned hospital, pays most of the county bills with the profits it generates from providing care to their population which has a lower per capita income than Richmond Cty.

It's up to the new administrator to start reeling these profits into the hospital and where they should actually go.....back to the county. The private groups using Universtiy wouldn't dare disclose the huge profits they make.

augusta citizen
9698
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augusta citizen 10/31/11 - 08:54 am
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What Willow said!

What Willow said! Consumerism, over-spending and "keeping up with the Joneses" is shamefully touted constantly. People are taught to want bigger and better and made to feel like failures if they don't accumulate more and more of the things they don't need to start with. I like the old saying from the first Great Depression: Use it up, wear it out or do without.

Craig Spinks
817
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Craig Spinks 10/31/11 - 07:40 pm
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Before dental-patient care

Before dental-patient care became customer service; before student learning was trumped by annual expenditures per student; before physicians' and surgeons' professional practices became health care corporations; and before more legal firms became shameless TV, radio, and print-media hucksters, all seemed to be more right with the world.

Does anybody else think that The Good Book's warning about "the love of money" might not be too far off-base?

Craig Spinks
817
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Craig Spinks 10/31/11 - 07:41 pm
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Riverman1, I'm coming to

Riverman1,

I'm coming to understand why you use a pseudonym.

Riverman1
87132
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Riverman1 10/31/11 - 07:58 pm
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Craig, haha...true. Although

Craig, haha...true. Although I discovered it's impossible to stay anonymous when others really want to find out who you are. If you heard a certain radio guy screaming at John Somebody the other day, guess who he was hollering at?

But your post about the "love of money" is not off base at all. That's IT.

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