NCPA - National Center for Policy Analysis


September 25, 2007

Nearly two dozen private hospitals in Los Angeles and Orange counties, accounting for up to 15 percent of beds in the region, are in dire financial straits and in danger of bankruptcy or closure, according to hospital administrators, industry experts and state data.

The financial woes result from a multitude of developments:

  • An increasing load of uninsured and low-income patients has resulted from overcrowding and the shutdown of public facilities; the number of uninsured patients visiting private hospitals, particularly in poor areas, has increased by one-third in Los Angeles County since 2002.
  • The recent closure of Martin Luther King Jr.-Harbor Hospital in Willowbrook left half a dozen nearby hospitals to absorb most of the 47,000 patients who used the public hospital's emergency room last year.
  • Smaller community hospitals are drawing fewer patients as a few larger facilities attract a growing share of doctors and insured patients.


  • As insurers have consolidated in recent years, they've squeezed many smaller facilities; private insurance companies generally pay higher rates to larger hospitals with greater bargaining power.
  • New, stricter state mandates on nursing ratios have raised labor costs, and a 2013 deadline to retrofit all hospitals to better withstand a major earthquake is estimated to be costing medical facilities $110 billion statewide.

But some experts and government officials are skeptical that the situation is as dire as some hospitals and community activists depict.  Others contend that hospitals in financial trouble can improve by cutting unprofitable services such as emergency rooms and obstetric and psychiatric units rather than filing for bankruptcy protection or closing.

Source: Daniel Costello and Susannah Rosenblatt, "Financial woes jeopardize area hospitals," Los Angeles Times, September 23, 2007.


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