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3 pages/≈825 words
Mathematics & Economics
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The Economic Downturn and Its Impact on Hospitals (Term Paper Sample)


This paper focus on the effects of the Economic Downturn on hospitals in the United States.


The Economic Downturn and Its Impact on Hospitals
[Institution Affiliation]
Question 1
As evidenced from the article, it is clear that the effects of the economic crisis on the medical sector, particularly on hospitals, are considerable. Based on the article by the American Hospital Association published in January 2009, it is generally argued that economic downtown often squeeze the sources of funds for hospitals. The analysis can be analyzed from two perspectives: credit crisis and health insurance coverage and financing. Economic downtown is said to stress hospitals’ borrowing through spurring credit crunch. Heine (2009) defines credit crunch as a temporary mismatch of credit supply and demand.
Just like any other ordinary businesses, hospitals equally need to borrow in order to finance their day-to-day operations, undertake technology purchases, and improve their long-term facilities. However, with borrowing becoming costly, debt financing has been difficult for many hospitals. In summary, the credit crunch (crisis) affects hospitals in seven key ways: (1) inability to issue bonds, (2) increased collateral requirements, (3) acceleration of debt, (4) increased interest expenses, (5) inability to withdraw funds from finance institutions (illiquidity), (6) inability to renew credit, and (7) difficulty in refinancing auction rate debt (American Hospital Association, 2009). The credit crisis has driven the profits of hospitals from positive to negative.
According to the American Hospital Association (2009), the crisis also affects hospitals through the erosion of health insurance coverage and financing. Here, economic downtown initially triggers unemployment, which eventually results to deterioration of employer-sponsored health insurance in an economy making people to heavily rely upon safety-net programs. Economic analysts, further, confirm that safety-net programs and providers are frequently squeezed during the economic crisis. Since most of these programs-such as Medicaid-are funded by states, during the crisis, their budget allocation tends to be vulnerable to cuts, as states tend to curtail their budget deficits.
Question 2
Owing to the severity of the current economic situation, hospitals need to make appropriate adjustments to their strategies and goals in order to thrive. First, it is rational for hospitals to adequately dissect services and programs, and reassess the benefits and costs attributable to the new economic environment. For instance, cost or expenditure minimization ought to be part of their ...
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