1. The Big Picture: A Look at Hospitals in a Volatile Healthcare Environment Stuart H. Altman, Ph.D. Chaikin Professor of National Health Policy The Florence Heller Graduate School for Social Policy Brandeis University

2. Stuart Altman Hospital Margins Not Keeping Up With Spending Growth

3. Stuart Altman Spending Growth Now Dominated by Hospital Services Source: Milliman USA Health Cost Index, in Strunk, Gabel and Ginsburg, 2001,Center for Studying Health System Change 2002 Percentage of Yearly Medical Spending Increase

4. Stuart Altman Total Hospital Margins Beginning To Trend Down Sources: 1997-2000 Moody’s all rating medians, 2001 AHA national hospital indicators survey * Estimate

5. Stuart Altman And It’s Not Just The Stock Market!

6. Financial Conditions of Hospitals In Some States Not Doing Well Hospital Operating Margins 2000

7. Stuart Altman Increasing Demand For Services Increasing Demand For Services ä Increased inpatient utilization ä Continued growth in outpatient use ä Increased ED use Accelerating Cost of Services Accelerating Cost of Services But, Inadequate Payment Rates from But, Inadequate Payment Rates from ä Medicaid ä Uninsured, and ä Medicare Hospitals Face The Following Dilemma

8. Look At Increasing Labor Costs! Estimate

9. Stuart Altman Can We Count on Higher Payments From Private Payers In Future To Bail Out Lower Payments From Government and Increased Number of Uninsured? Maybe--- Maybe--- ä Less Pressure From Managed Care But--- But--- ä What About v Growth of Specialty Hospitals, and v New Non-Hospital Delivery Systems that Focus on Well Paying Patients ä Increased Patient Cost Sharing Could Reduce Use

10. Stuart Altman Growing Demand for Emergency Room Visits And The Addition of New Hospitals

11. Stuart Altman Emergency Department Visits 1990-2001 Year

12. Stuart Altman Advisory Board – “We Need More Hospitals” Additional Hospitals In 2011 Under Different Assumption