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Hospital Downsizing
Factors forHospital Downsizing and the Decline in Patient Utilization
Earl Greenia, Ph.D., FACHE 4/4/16 The US Healthcare System
Running Head: HOSPITAL DOWNSIZING
Colorado State University –GC
Tunisia I.E. Al-Salahuddin
Master - Healthcare Administration and Management

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Table of Contents
Introduction Pg. 2
First Factor for Hospital Downsizing
(Medicare/Medicaid Fund Depletion) Pg. 3
Second Factor for Hospital Downsizing
(High Administrative Fees) Pg. 3
Third Factor for Hospital Downsizing
(Holistic and Alternative Medicine) Pg. 4
Conclusion Pg. 5
References Pg. 7

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Introduction
In the coming years the United States will find themselves going through a number of
changes within the Social Security Administration which will affect the Health Care Industry as
we know it “Hospital size has long been an area of discussion and debate in the U.S. healthcare
industry. Questions have consistently focused on cost management or efficiency in large versus
small hospitals. A persistent question among researchers is whether efficiencies are associated
with larger facilities through economies of scale, or if there are alternate scenarios that play a
significant part in hospital cost and efficiency” (2009, JHM). Since the Affordable Health Care
Act was established it made obtaining health care much more affordable and accessible, but at
the same time there has to be some cut back.
While many Americans were able to obtain health care services the cost went up in the Social
Security Fund. This increased cost also affected Medicaid/Medicare alike bringing the United
States Debt to climb to almost one 100 Trillion dollars which has been building up since 1940.
Utilization within the health care industry by patients will go down, and it must in order to ease
the burden and the state fund debt, or the fund will be exhausted sooner than 2031, “The amount
of debt globally has soared more than 40 percent to $100 trillion since the first signs of the
financial crisis as governments borrowed to pull their economies out of recession and companies
took advantage of record low interest rates, according to the Bank for International Settlements”
(2014, Bloomberg). Many have said that the debt has actually reached into the Zillions, but the
government departments that do the forecasting like the GPI and the CPI which keep track of
goods and services this also includes medical benefits, medical supplies, and insurance carriers’
data. In this working paper I will discuss three major factors that affect the reason why hospital
downsizing will be down within the United States.

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Hospital Downsizing
First Factor for Hospital Downsizing (Medicare/Medicaid Fund Depletion)
One of the major factors for downsizing within hospitals is money. The financial grants and
programs have to be available in order to meet the needs of the patients. Obama brought in the
affordable Care Act, but this has to be regulated as well meaning: over usage of services have to
be limited, Even before these developments, “The Medicare Payment Advisory Commission
(MedPAC) estimated that Medicare margins were -7 percent in 2012, and with the ACA’
spayment cuts, the chief actuary for the Centers for Medicare & Medicaid Services (CMS)
concluded that up to 20 percent of hospitals could become unprofitable” (2013, Coyne). Since
Social Security announced that the state Fund for Medicare and Medicaid will be depleted by
2031 or sooner there will have to be cuts somewhere within the health care industry. Some of
the cuts may be in hospital administration, inpatient services, along with outpatient services. In
the later portion of this working essay paper I will discuss where alleviation may come from due
to the major cut backs, and how preventative measurements along with alternative Doctors may
help.
Second Factor for Hospital Downsizing (High Administrative Fees)
High administrative fees is another reason for hospital cut backs, “Hospitals may be
downsizing and merging to survived, but they are also integrating, working together with staff,
as one unit, to deal with managed care providers” (1994, Janie). The administration fees and
hospitals seem to rise each year, but since the Affordable Care Act there has been changes within
the entire infrastructure of health care as to how the money is spent and how it is allocated in
departments, “They found administrative costs, which researchers say include the costs of a
clinic receptionist and employee benefits, in the U.S. made up a greater percentage of total

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hospital expenditures than all other countries analyzed--25.2 percent. That was more than twice
the percentages in Canadian and Scottish hospitals, which were tied for last” (2014, Budryk).
The high cost of administrative fees have caused Hospitals to find ways to transfer cost to other
areas of health care where administrative fees are not so high. When you have so many diverse
departments such as medical billing and utilization departments like inpatient and outpatient then
fees get high on both ends for patients and hospitals alike. When doing the calculations the
money comes from the state fund!
Third Factor for Hospital Downsizing (Holistic and Alternative Medicine)
Preventative Care is another reason for hospital downsizing. Development and growing
within the Alternative Medicine industry in the Western Hemisphere of the world, much of the
money is going into Preventative Health Care. Kaiser Permanente is a major health care factor
within society today and has created a CAM program within their Thrive campaign. CAM
which stands for Complementary Alternative Medicine works to prevent health issues before
they become a problem. By Kaiser using the CAM program it cuts the cost in one area and puts
it in another but less than half the price meaning; you pay the workers, but you do not have over
excessive lab fees, high medical billing fees, high administrative fees, constant visits by the
patient, and other cost that go along with having a sick patient whom visit the doctor and hospital
on a norm. “CAM is often described as a diverse group of health care systems, practices, and
products that are generally not considered a part of conventional Western medicine. Examples
of CAM practices are massage and acupuncture and products such as herbs, supplements and
mind-body medicine, and other alternative therapies. CAM treatments may have originated as a
health care system in another culture or as a more recent therapy or practice that arose outside of

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conventional care” (2016, KP). I remember my Doctor at Kaiser years ago told me to slow up on
the fatty foods and prescribed Milk Thistle for me considering I had no chronic health disorders
or underlining issues, but for some reason he knew Milk Thistle was a good herbal supplement
for me and now to this date doctors at Kaiser are prescribing herbs to their patients vs drugs.
I to believe that Kaiser has made a wise choice to implement and develop the CAM program
to help prevent illness rather than tinker with the illness or research it, but rather work in the
territory of healing and wellness. The practice of studying the healing process is also big money
and big business which could actually bring in a profit instead of accumulating an overhead of
un-wanted cost. The diverse forms of Alternative Medicine and Certified/Licensed Practitioners
have a long list from Naturopathic Doctors, Herbalist, Reflexologist, Reiki Master Practitioners,
Yoga Masters, Acupuncture, Holistic Psychologist, Massage Therapist, Ayurveda Doctors &
Practitioners, and the list goes on.
Conclusion
When the Obama Care presented a reconstructed Affordable Care Act the community at large
never really put any thought into how the money would be spent or what cut backs would be
taking place. The Affordable Care Act is a blessing and curse all in one. While there is cut
backs in one area of the health care; building up in other areas will be the norm for the coming
future within the health care industry. The Obama Care Act that has been offered to everyone
within the United States whom qualifies is a big help. This Act comes with rules and regulations
such as well-being and preventative measurements; the patient/client must do their part along
with the health care Facilities, Practitioners, and Doctors.

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Utilization will gear toward new research and development in the healing and wellness sector
will be the norm but half the patient cost. Many of the cost that normally are spent on patients
care on a monthly bases such as chronic illness will now go into the Naturopathic and Holistic
realm of care. Doctors and Practitioners will still get paid the same, but patient care cost will go
down. Michelle Obama has geared up with others to bring in a healthier America along with
people like Donald Trump whom has Planet Gyms popping up all over the United States from
refurbished dilapidated buildings. By 2031 or sooner the Social Security Fund will be depleted
and according to the Congressional Budget Office, “ CBO projects that, under current law, the
two Social Security trust funds combined would be exhausted in calendar year 2031. Once the
trust funds are depleted, the Social Security Administration would no longer have legal authority
to pay full benefits when they are due” (2013, Mayerson & Daoey). The entire reconstruct
which has been taking place since 1940 will be complete and a new infrastructure will be in
place.
The norm will no longer be just going to the Doctor and getting authorization unless you have
private insurance that you pay into. Employees will actually need their own bank accounts
which will take funds from their pay checks each month and put the funds into a separate private
account. The worker will be able to put in as much as they want vs the old way of the HR
department pulling funds from your check and putting them into the State Fund. Many working
children will also be responsible for their elderly parents. The one benefit about this new process
that will be implemented is you can purchase as much private medical benefits as you want out
of pocket by different medical insurance providers. Regardless if the American people feel that
the United States has the money to put back into the fund the reconstruct does not call for

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funding to go back into the United States Fund because this is the plan of the reconstruct of the
Social Security Fund.

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Reference
Coyne, J. S., Richards, M. T., Short, R., Shultz, K., Singh, S. G., & Douglas, S.
(2009). Hospital cost and efficiency: So hospital size and ownership type really
matter? Journal of Healthcare Management, 54(3), 163-174.
Kaiser Cam. (2016). East Bay Complementary & Alternative Medicine - Kaiser Permanente.
Retrieved April 07, 2016, from https://thrive.kaiserpermanente.org/care-near-
you/northern-california/eastbay/departments/complementary-alternative-medicine-4/
K. P. (2013). The Rising Tide of Hospital Layoffs. Retrieved April 04, 2016, from
http://www.hfma.org/Content.aspx?id=15617
Rosman, J. L. (1994). Wielding a leaner scalpel: Hospitals will be forced to downsize as health
care industry reforms. Fairfield County Business Journal, 33(5), 9. Retrieved from
https://csuglobal.idm.oclc.org/login?url=http://search.proquest.com.csuglobal.idm.oclc.or
g/docview/216389468?accountid=38569
Z. B. (2014, September 9). US hospitals have highest administrative spending costs in the world.
Retrieved April 07, 2016, from http://www.fiercehealthcare.com/story/us-hospitals-have-
highest-administrative-spending-costs-world/2014-09-09