OLMIS

by Lynn Wallis
Published Jun-2-2010

Introduction Oregon¿s Hospital Industry Rural Hospitals in Oregon Top Occupations in the Hospital Industry Hospital¿s Portion of Health Care Expenditures is Decreasing Recent Trends Affecting Oregon¿s Hospitals Summary

Few people may realize that hospitals, which account for over one-third ($718.4 billion) of our nation's health care expenditures and employ almost 4.7 million workers, began in pre-industrial societies as religious and charitable institutions. Prior to the end of the nineteenth century, the objectives of hospitals were to tend to and house the sick who were homeless, poor, or insane.

The transformation of hospitals into today's sophisticated medical facilities was driven not only by advances in science but also by the demands of an industrializing capitalist society which brought large concentrations of people into urban centers according to Paul Starr, author of an analysis of the nation's health care industry titled, The Social Transformation of American Medicine. After the 1870s, hospitals began redefining themselves as institutions of medical science rather than of social welfare and began employing professional health care workers instead of charity workers.

The hospital industry is a sub-sector of one of the largest industries in the United States - the health care and social assistance sector. Hospitals make up about 29 percent of all health care employment. Hospitals tend to employ large numbers of workers. Nationally, seven out of 10 hospital employees were in establishments with more than 1,000 workers in 2006 whereas 85 percent of non-hospital health care establishments employed fewer than 20 workers. According to the Bureau of Labor Statistics (BLS), although hospitals employ more than one-third of the health care workforce, they make up only 1 percent of all health care establishments.

Hospitals provide inpatient health services, and many of these services can be provided only with specialized facilities and equipment. Services include complete medical care, ranging from diagnostic services to surgery to continuous nursing care. Some hospitals specialize in treating the mentally ill, children, cancer patients, or military veterans. They also provide outpatient services as a secondary activity and have been shifting from inpatient to outpatient care as new technology and outpatient facilities grow.

The number of hospitals in the U.S. has been decreasing. According to the American Hospital Association, the total number of hospitals declined from 7,156 in 1975 to 5,756 in 2005. Two main factors are contributing to this decline:

• More and more medical procedures are now being performed outside of hospitals on an outpatient basis due to advances in technology.
  
  
• Hospitals that have come under increasing financial pressure due to decreasing reimbursements and increasing operating costs often merge into larger hospitals to benefit from economies of scale and decreased competition.

Oregon hospitals employed 61,545 workers in 2009 which was 35 percent of all health care employment (Graph 1). Hospitals are found in private, local, state, and federal ownership. The majority (87%) of Oregon's hospital jobs were in privately owned hospitals in 2009; 7 percent were in federal hospitals, 4 percent were in local government hospitals, and 2 percent were in state-owned hospitals.

Although the number of hospital establishments fell from 99 in 1980 to 79 in 2009, hospital employment grew by over 25,659 - a 71.5 percent rise - during this same time period (Graph 2).

According to the Oregon Office of Rural Health (ORH), about one-quarter of Oregon's population lives in counties designated as either rural or frontier, and just over half live in counties with a mix of urban and rural areas.

It is not surprising then that about 45 percent of Oregon's hospitals are classified as rural hospitals. According to the ORH, this designation is based on distance and is defined as "all geographic areas 10 or more miles from the centroid of a population center of 40,000 or more." Robert Duehmig, Communications Director for the ORH, stated that prior to the 1990s Oregon lost a significant number of rural hospitals due to a payment reimbursement system that wasn't covering hospitals' total costs. The Medicare Rural Hospital Flexibility (Flex) Program, established in 1997, is available in all 50 states and helps to insure the financial viability of small, rural hospitals.

The Flex Program enables certain rural hospitals to be classified as Critical Access Hospitals (CAH). To be eligible a rural hospital needs to meet certain criteria such as having a certain degree of remoteness, fewer than 26 beds, an annual average length of stay of less than 96 hours, offering 24 hour emergency medical and nursing services, and participating in a rural health network with at least one non-CAH hospital. Of Oregon's 35 rural hospitals, 25 facilities have a CAH classification. This designation gives rural hospitals improved financial stability through enhanced and extended Medicare reimbursements and reduced operating costs.

Hospitals employ workers with various levels of education and training and provide a diverse variety of services according to BLS. Nationally, the largest portion of hospitals' workforce is registered nurses (28%). The next largest occupations include nursing aides (CNAs), licensed practical nurses (LPNs), and radiologic technologists and technicians. Hospitals also employ large numbers of office and administrative support workers.

Oregon's top 20 occupations in the hospital industry are shown in Table 1. Over half of registered nurses in Oregon (55%) worked in hospitals in 2008. During the next decade (2008-2018), about 12,720 total openings are expected in this occupation for all industries. Nursing aides (CNAs) made up the second largest occupation and nearly 4,541 total openings are expected by 2018. Many of the occupations listed in Table 1 require a minimum of postsecondary education or less; fewer require an associate degree or higher. There is a definite correlation between the level of education and average wages for these top occupations. The mean wages for occupations with short-term or moderate-term, on-the-job training vary from $19,659 to $59,010; the mean wages for occupations requiring postsecondary training vary from $24,895 to $91,465; and the mean wages for occupations requiring an associate degree or higher vary from $31,725 to $127,837.

According to the Centers for Medicare and Medicaid Services (CMS), U.S. health care spending was expected to reach over $2.5 trillion in 2009. This translates to $8,160 per person and makes up 17.6 percent of the nation's gross domestic product.

The hospital industry plays a critical role in the health care system and consumes the lion's share of the resources spent on health care. This share has been steadily decreasing since 1982 when hospital expenditures made up 40 percent of all health care expenditures according to Centers for Medicare and Medicaid Services. In 2009, hospital spending made up only 31 percent of total health care spending at $760.6 billion (Graph 3).Hospital expenditures in Oregon show similar patterns, with the share dropping from 41 percent in 1982 to 34 percent in 2004. This change in expenditure patterns reflects advances in technology and consumer demand, which is contributing to more medical procedures being carried out in physicians' offices or on an outpatient or clinic basis.

According to the Office for Oregon Health Policy and Research, over the past decade Oregon's healthcare market has experienced significant economic, structural, and policy changes that have affected the way hospitals, health insurance plans, physicians, and purchasers do business and how consumers access healthcare services. Major factors directly affecting the hospital industry today include:

• Oregon's population is changing rapidly, not only in total size but also in its age distribution and racial and ethnic makeup. These changes have implications for health, health coverage, and healthcare utilization for the future.
  
  
• Health care worker shortages exist that are consistently failing to meet demand.
  
  
• Rising healthcare costs and low reimbursement rates for Medicare and Medicaid are directly affecting the hospital industry's bottom line.
  
  
• Increasing numbers of uninsured Oregonians show a direct correlation to increased provision of emergency department services. The percent of Oregonians without health insurance increased from 10.7 in 1996 to 18.7 percent in 2008.
  
  
• The percentage of uncompensated care in Oregon's hospitals grew from 3.7 percent in 1995 to 6.8 percent in 2007.
  
  
• Growing outpatient services tend to skim off the most profitable services that hospitals have traditionally offered. Since 2000, the number of freestanding, ambulatory surgery centers in Oregon has increased from 32 to 80.

Hospitals have been transformed from charity institutions for the homeless, poor, and insane during pre-industrial society into one of the largest, highly scientific and technical service industries of today. They account for over $718 billion in annual health care expenditures in the U.S.

Hospitals generally employ a large number of workers from a wide variety of occupations and skills. Although the number of Oregon's hospitals has decreased during the past 29 years, hospital employment grew by 25,660. Almost one-half of Oregon's hospitals are classified as rural. A large portion of the industry's workforce is made up of registered nurses, nursing aides, medical secretaries, maids and housekeeping cleaners, interviewers, radiologic technicians, and healthcare support workers who, when combined, made up 40 percent of the hospital workforce in 2008.

Hospital expenditures as a portion of all health care expenditures have been shrinking over time. This trend reflects advances in technology which are contributing to shorter hospital stays and more procedures that are being performed outside of the hospital setting in clinics or physicians' offices. Other trends include changes in population demographics, workforce shortages, rising healthcare costs and low reimbursement rates, and rising numbers of the uninsured.