Credit Crisis, Deteriorating Revenues Jeopardize Ability of Hospitals to Meet Seismic...

Credit Crisis, Deteriorating Revenues Jeopardize Ability of Hospitals to Meet
Seismic Compliance Deadlines

Updated Economic Survey Shows 64 Percent of Hospitals Cannot Secure Funds for
Seismic Mandate

SACRAMENTO, Calif., July 30 /PRNewswire-USNewswire/ -- The nation's ongoing
credit crisis, combined with deteriorating hospital revenues caused in large
part by governmental underfunding, is jeopardizing the ability of California's
hospitals to comply with state-mandated deadlines for seismic retrofitting,
according to an updated economic impact report released today by the
California Hospital Association (CHA).

The report, which is based on a survey of hospital chief financial officers
(CFOs) conducted in April 2009, shows that 64 percent of hospitals report that
they will not be able to access the capital necessary to comply with the
state's 2013/2015 seismic deadlines. More than a quarter of hospitals
statewide (28 percent) have seen their interest expenses increase during the
first quarter of 2009, while many other hospitals have been frozen out of the
credit market entirely. As a result, hospitals throughout California are
faced with limited access to capital and increased costs of borrowing. These
dual challenges come at a time when hospitals are facing an unfunded mandate
for seismic improvements estimated to cost up to $110 billion without
financing charges.

"This report makes clear that revisiting the current timelines for the seismic
mandate is essential," said CHA President and CEO C. Duane Dauner. "The
faltering economy is forcing all segments of our society to make difficult
decisions. For many community hospitals, these decisions come down to whether
or not they will be able to ensure that patients have access to care 24 hours
a day, seven days a week."

Under current state law, the state could force hospital buildings that are not
in compliance with the seismic standards by January 1, 2013 (or January 1,
2015, if an extension has been granted) to close their doors to patient care.
An estimated 900 acute-care hospital buildings, out of a total of 2,700
structures, face closure if they cannot meet the 2013/2015 deadlines.

In order for hospitals to access affordable capital for projects such as those
related to the seismic mandate, creditors and rating agencies evaluate a
hospital's balance sheet and its demonstrated financial stability. Creditors
also look for sustained operating results, specifically operating income of
greater than 3 percent. In aggregate, California hospitals reported operating
margins of less than 1 percent for each of the last three years, with margins
in 2007 and 2008 in the red, according to the CHA report.

Among the factors impacting operating margins is a significant increase in the
number of uninsured patients seeking care in hospital emergency rooms.
According to the CHA report, more than 57 percent of hospitals have seen a
rise in the number of uninsured patients during the first quarter of 2009,
most likely as a result of rising unemployment and the loss of job-based
health coverage. This is a 22 percent increase since CHA released its first
economic impact report in January. Additionally, more than half of
California's hospitals are reporting a decrease in inpatient admissions and
elective procedures.

In 2008, the costs of uncompensated care provided by California hospitals
totaled $11.3 billion. Of that amount, Medicare payment shortfalls accounted
for nearly $3.7 billion, while Medi-Cal underpaid hospitals to the tune of
$4.1 billion. An additional $2.1 billion in 2008 losses are attributable to
bad debt and charity care.

"California hospitals are not unique to the negative impacts of the economic
recession," Dauner noted. "The unfunded seismic mandate, however, places an
extraordinary burden on our community hospitals at a time when they can least
afford it."

A full copy of the special report, called "California Hospitals and the
Economy -- Ongoing Credit Crisis Jeopardizes Seismic Compliance Mandate," can
be found on CHA's website at www.calhospital.org.

SOURCE California Hospital Association

Jan Emerson of California Hospital Association, +1-916-804-0663 - Cell