A recent survey conducted by Price Waterhouse Coopers (PWC) asked hospitals what was the most important thing for them to do in 2010. The number one response was to cut costs.

As soon as my mind saw that, one word immediately popped into my head: “Still?”

Many people believe hospitals are making money hand over fist. The reality is that the overwhelming majority of hospitals are barely scraping by these days because of the consistent cuts to Medicare and Medicaid, lower reimbursement from insurance companies, and more defaults on paying hospital bills because more people are out of work and can’t pay any bills, let alone health care bills. Who remembers earlier this year when it was announced that 60% of bankruptcies were the result of medical bills?

I’ve been in health care for more than 25 years, and since the mid 90’s, every hospital I’ve been at has bee working hard to find new ways to cut costs. Some moves have been way wrong, while others have reduced the type of care patients get. For instance, most hospitals used to have a plethora of registered nurses (RN) and licensed practical nurses (LPN) and the work was divided up nicely so that LPNs took care of patients while RNs took care of all the administrative stuff, but could also take care of patients. Then, because RNs could do so much more, some hospitals started eliminating LPNs and making RNs handle way more work. This meant that instead of a nurse maybe being responsible for 4-7 patients suddenly some nurses were responsible for as many as 20 patients, and still had to try to keep up with all the other work they have to do. Who suffers? Patients.

HealthLeaders Magazine also came up with a study recently showing hospital margins significantly below break even, though supposedly it was getting better. Substitute “budget” for “margin” and suddenly you realize that hospitals are running at a deficit when it comes to expenses versus revenue. At one point in 2007 50% of the hospitals in the nation were running below budget; by the 1st quarter of 2009, the figure had dropped to just below 30%. How have they done it? Pretty much by cutting expenses only. And that’s hard to do as the cost of health care keeps going up, especially pharmaceuticals and supplies.

In good times or bad times, hospitals overall struggle to stay above budget. At some point, cutting costs just isn’t going to get it done. With the pending full passage of health care reform, we’ll see what kind of impact it ends up having on hospitals.