Healthcare Providers Say High Costs and Low Revenues Plague Industry, According to Mellon Survey

Healthcare Providers Say High Costs and Low Revenues Plague
Industry, According to Mellon Survey 


RIDGEFIELD PARK, N.J., Nov. 29  /PRNewswire/ -- A new survey released today by
Mellon's Human Resources & Investor Solutions (HR&IS) business reveals that
controlling costs and growing revenues are key strategic problems for the
healthcare industry. The good news:  healthcare systems are making substantial
progress with technology and patient care challenges.

These are among the major findings of Mellon's "2004 Total Compensation in
Integrated Healthcare Systems Survey." The annual study, completed in the third
quarter, surveyed 60 healthcare institutions across the U.S., 70% of which are
multi-hospital systems.

Strategic Challenges.  Controlling costs remains the number one operational
problem.  Sixty percent of respondents cite it as a strategic challenge.  There
is also a clear consensus that the problem has remained serious or become
worse.  In fact, only 11% of respondents feel the situation has improved over
the past three years.

"Cost containment is healthcare's 'rock of Sisyphus,'" commented Thomas P.
Flannery, Ph.D., HR&IS' healthcare compensation leader.  "The industry expends
tremendous effort to solve the problem. But each year, whether we are in
recession or recovery, the task is daunting. Cutting costs is at odds with the
healthcare industry's mission of providing the best possible care.  Cost
reduction often loses out to today's expensive treatment options."

Cost and revenue issues are seen as problems where little improvement is being
made.  Twenty-eight percent of respondents cite decreasing revenue as a
strategic challenge.  By a margin of nearly four to one, they believe the
problem has remained as serious or become worse, rather than improved, over the
past three years.  Twenty-seven percent feel the cost of drugs and services is
a challenge; by a two-to-one margin, more people believe this problem has
stayed as serious or worsened than feel it has improved.

The healthcare industry is improving in certain areas, such as patient care and
the application of technology.  Nearly 40% of the respondents say that service
to patients has improved and not a single survey participant feels it is worse
now than it was three years ago.

Similarly, a range of technology issues -- updating information, medical and
internet technology, as well as securing patient information -- is seen as
improving.  Again, not a single survey participant believes any of these issues
has become worse over the last three years.

Initiatives to Address Problems.  In an apparent paradox, the survey shows that
major investments to improve operations have tapered off, despite the
continuing cost and revenue problems.  The percentage of institutions using
business process reengineering (BPR) to contain costs fell from 77% in 2003 to
53% this year. Similar declines were reported in using integrated computer
systems and outsourcing to contain expenses.

The percentage of healthcare organizations improving their coding, billing and
collection processes fell from 64% last year to 45% this year.

According to Flannery, this is not the paradox it seems to be.  "Many
healthcare institutions spent all the resources they could on big ticket items
such as BPR and systems integration," he noted.  "These organizations are now
weighing the high cost of these initiatives against the potential gains. What's
more, past experiences are making many of them skeptical success can be
achieved."

Business Conditions.  The survey participants' view of business conditions for
the healthcare industry is pessimistic.  Only twenty-four percent report they
exceeded their business goals in 2004, compared to 50% a year ago. Twenty-two
percent say they failed to achieve their goals, up from 18% in 2003.

Just 13% regard their current financial results as better than usual, down from
36% last year.  Forty percent say that results are softer than usual, compared
to last year's corresponding result of 14%.

"These results highlight the importance of a continued focus on solving the
healthcare industry's cost and revenue challenges," Flannery noted. "Many in
this industry are frustrated with these continuing problems and tempted to
scale back their attempted solutions, but doing so will likely result in even
more disappointing business results."

Human Resources & Investor Solutions is the worldwide human resources and
shareholder services business of Mellon Financial Corporation, a global
financial services company.  Headquartered in Pittsburgh, Mellon is one of the
world's leading providers of financial services for institutions, corporations
and high net worth individuals, providing institutional asset management,
mutual funds, private wealth management, asset servicing, human resources and
investor solutions, and treasury services. Mellon has more than $3.7 trillion
in assets under management, administration or custody, including $670 billion
under management.  Its asset management companies include The Dreyfus
Corporation and U.K.-based Newton Investment Management Limited.  News and
other information about Mellon is available at http://www.mellon.com/ .

An executive summary of Mellon's "2004 Total Compensation in Integrated
Healthcare Systems Survey" is available to the media by contacting Ed Gadowski
at [phone].  It is available to other interested parties from Shawn
Garcia at [phone]. 

DATASOURCE: Mellon Financial Corporation



CONTACT:   Ed Gadowski, Corporate Affairs of Mellon Financial

Corporation, [phone],  



Web site:  http://www.mellon.com/ 

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