Keeping a large city hospital solvent: is it an impossible balancing act?

August 7, 2008  |  General

Ground zero for many of the medical care debates today is the large, urban hospital — places such as Beth Israel Deaconess hospital in Boston. Even though it is one of the flagship hospitals of Harvard, it struggles along with all urban hospitals to balance its books every year and still carry out its mission. What makes Beth Israel interesting for anyone following the healthcare debates is that its President and CEO, Paul Levy, writes a blog called Running a Hospital. In it he is quite forthright, as when he wrote frankly about an egregious medical error.

What makes Levy’s blog unusual in the medical blogosphere, besides the stature of its author, is that he writes under his own name — most bloggers don’t, although a moderate amount of sleuthing can sometimes identify who they are.

Anyway, Levy recently laid out for anyone interested the nuts and bolts of how a major urban hospital plans its budget. It makes for pretty sobering reading. Long ago most large hospitals were charity operations, with physicians donating their time but patients having little or no say in what kind of treatment they got. These days hospitals, even the non-profit ones, are often urged to be run more like a business.

One of the fundamental differences between most businesses and a hospital, however, is that although hospitals have some control over the cost of the service they provide, they have little or no control over what they get paid to provide the service. It puts them in a severe squeeze when costs rise but reimbursement does not — they must find other sources of revenue to bridge the gap, and their options to do that are limited. (It turns out that philanthropy gives the best return on investment, about 16:1.) Levy’s blog gives you an insider’s close-up view of how a huge hospital like Beth Israel (1.2 billion in annual revenues) juggles these competing demands.

My own view? Healthcare is not a widget, a commodity. It’s a basic human need. It doesn’t follow the usual rules of the marketplace, and it shouldn’t.

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2 Comments


  1. Many things at least as essential as healthcare, can be considered basic human needs. The economics of healthcare has been distorted, both intentionally and as a result of the law of unintended consequences, by extensive governmental exceptions from the rules of the marketplace, which exceptions were obtained at the cost of extensive governmental regulation. A market is a solution, and its rules should be followed.

  2. Joseph–

    Thanks for your comment. I suppose that this is one issue that will ultimately be decided at the ballot box (as it should). It’s complicated, but my own opinion is that usual marketplace economics don’t apply to healthcare. (Supply and demand, for example–in healthcare, supply seems to drive demand, rather than the other way around, and excess supply seems to make prices go up, not down.)

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