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U.S. HOSPITALS SLASH SPENDING AND STAFF AS MARKET FORCES, HEALTH CARE REFORM DRIVE CHANGE

 CHICAGO, Nov. 30 /PRNewswire/ -- Market-driven cost containment initiatives and the prospect of government-mandated health care reform have caused a major downturn in the nation's hospital industry and spread pessimism among its executives, the fifth annual LINC Capital Survey shows.
 Pressured by market forces such as managed care, hospitals have made sweeping cutbacks this year. Two-thirds have cut operating budgets, while 54 percent have decreased future budgets and 49 percent have reduced staff through layoffs and attrition. The 656 survey respondents, representing more than 10 percent of the nation's hospitals, included chief executive officers, chief financial officers, and other top administrators.
 Hospital executives say the prospect of health care reform hasn't compromised patient care to date, with 77 percent reporting that it has had no impact on the quality of care at their institutions. Yet steps hospitals are taking now to prepare for health care reform are paving the way for massive change and could have a significant impact on their ability to deliver care in the future. Citing uncertainty about reform, 30 percent delayed planned capital projects (building construction) this year, and 27 percent delayed capital equipment purchases such as major diagnostic imaging equipment.
 Hospital executives were resoundingly negative in their assessment of reform's future financial impact. An overwhelming 75 percent expected reform to decrease their institution's overall access to capital, with 19 percent seeing no effect and only 7 percent seeing an improvement(a).
 This was a stark reversal of the increasing confidence expressed by respondents in previous surveys. Only 11 percent of hospital executives believed their access to capital was improving this year, down from 28 percent in 1992 and 23 percent in 1991.
 "This dim assessment of future financial prospects is in sharp contrast to the growing optimism reported by hospital executives in recent years," said Martin E. Zimmerman, president and chief financial officer of The LINC Group, Inc. "Cost containment efforts are now taking hold, and the chilling effects of market forces and health care reform are combining to push hospital spending downward."
 Hospitals' average capital project and capital equipment budgets rose slightly, with capital project budgets increasing to $5 million this year from $4 million last year and equipment budgets rising to $2.3 million from $2.2 million. However, the increase likely reflects commitments already in place due to multi-year projects, Zimmerman said.
 More telling was the downturn in projections for future capital spending, another sudden reversal of the upward trend of recent years. Fewer hospitals planned to increase spending, and more planned to cut spending. Only 32 percent of the respondents said they expected to continue to increase spending on equipment, down from 60 percent in 1992 and 72 percent in 1991. Meanwhile, more respondents -- 27 percent -- said they expected to decrease spending on capital equipment in the future, up from 13 percent a year ago and 6 percent in 1991. Projections on property spending showed a similar negative trend.
 Reduced hospital spending likely will have a ripple effect that reaches beyond the hospital industry into other manufacturing and employment sectors, said Zimmerman. "With the health care industry representing nearly one-seventh of the gross domestic product, cutbacks of the size indicated in the survey have a potentially enormous impact," he said. "With nearly half the hospitals reporting staff reductions, and a quarter expecting to cut equipment budgets, the implications are quite serious."
 In response to market conditions and the outlook for health care reform, a key shift in the anticipated use of external capital financing vehicles already is beginning, the survey shows. More hospital executives anticipated that the use of leasing would grow than predicted growth in two other major categories, bank loans and tax-exempt debt. There were nearly twice as many respondents -- 33 percent -- who predicted that the use of leasing would increase as there were who said it would decrease -- 17 percent.
 "More hospitals are recognizing leasing as a cost-effective solution to the problem of capital financing in an economic environment that's going to be more challenging than ever," said Zimmerman.
 An advance executive summary of results from LINC's 1993 Capital Survey, including additional findings on hospital financing trends, is now available from The LINC Group on request. The full executive report will be available on publication early next year.
 The LINC Group, Inc. 303 East Wacker Drive, Chicago, IL 60601, is one of the nation's leaders in health care finance, having provided more than $1.25 billion of health care equipment leasing and related financing since its founding in 1975.
 (a) Because of rounding, figures in some categories may not add up to exactly 100 percent.
 -0- 11/30/93
 /CONTACT: Mary Wagner, 312-988-2356, or Larry Macke, 312-988-2359 for LINC Capital Survey/


CO: LINC Group Inc. ST: Illinois IN: HEA SU:

JG-PS -- NY095 -- 8856 11/30/93 15:37 EST
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Date:Nov 30, 1993
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