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A significant number of hospitals are in legal wrangles with computer vendors because they are unsatisfied with the computer systems they've purchased. Many of these disputes arise because the hospitals signed contracts that were not in their favor.

Hospitals seeking to bolster their financial performance must improve their relationships with physicians, according to a panel of six hospital chief financial officers brought together by Hospitals magazine. CFOs are also concerned that Medicare's new method for reimbursing hospitals for capital expenses could further squeeze their resources.

Some starting similarities lie behind the recent defaults on $122 million in bonds by four hospitals that were rated by StandardPoor's (SP). These hospitals vary widely in terms of bed size and geographic location. However, SP officials were interested to learn what traits these hospitals shared and analyzed their performance indicators and operations over the past decade.

Not-for-profit hospitals will continue to face legal challenges to their tax-exempt status as state and municipal budgets are squeezed by service demands, says Spencer Knapp, partner with Dinse, ErdmannClapp, Burlington, VT. Knapp warns that hospitals could endanger their not-for-profit status by portraying themselves as businesses. "You want to emphasize the hospital's mission, not the bottom line," says Knapp.

Hospital CEOs don't want to see Medicare capital reimbursement fall victim to budget politics. Yet, that's likely to happen if the Health Care Financing Administration folds capital reimbursement into the prospective pricing system (PPS), CEOs say. Moreover, the majority of CEOs say that no fair method of including capital payments in PPS rates can be developed.

Are hospitals facing a capital crisis? Wall Street is taking a long, hard look at hospitals' bottom lines--and many analysts don't like what they see. Hospitals' increasing reliance on long-term debt, lower debt-service coverage ratios, and weakening performance indicators all signal a potentially volatile situation for some sectors of the field. Which hospitals are at risk? Experts point to hospitals in Southern California and New York. But others say that hospitals in moderate-size cities with 250 beds and $40 million or more in long-term debt are vulnerable. However, 40 percent of the 600 CEOs who responded to our Hamilton/KSA survey agree that the continued erosion of reimbursement will require a government bailout similar to the savings and loan industry. "A great deal depends on public policy," says Darrel Brownell, executive vice-president and chief financial officer, Memorial Health Services, a two-hospital system based in Long Beach, CA. "The government has the ability to maintain the industry in a stable condition, or it has the ability to force it into a bailout situation."

What consulting services are health care CEOs using? Hospitals magazine teamed up with the American Association of Healthcare Consultants to find out. The 723 CEOs who responded say legal assistance and strategic planning are today's top consulting areas. CEOs who were asked to comment on the survey results were not surprised that legal assistance topped the list. The trend toward hiring more outside attorneys "is a reflection of the multiplicity of issues hospitals face in the legal arena", says Ronald Aldrich, president and CEO of Franciscan Health System, Chadds Ford, PA. Why are CEOs placing so much emphasis on strategic planning? The answer is simple, say executives: Hospitals are trying to find ways to survive difficult times.

Although direct contracting is very complex and somewhat risky, it offers hospitals a chance to increase patient volume and to move away from flat discounting toward more value-oriented reimbursement, say experts. Employers--both large and small--are now beginning to realize that such arrangements have definite advantages.

The debate over whether and how to incorporate Medicare Part A capital payments into the prospective pricing system is beginning to seem like a political rerun, as the Health Care Financing Administration prepares its third proposed capital regulations. And once again hospitals are sprucing up opposing arguments to convince Congress that they are right and HCFA is wrong.

In today's tough economic environment for hospitals, what separates the winners from the losers? An analysis of the sixth annual CEO Survey, jointly sponsored by Hospitals and Hamilton/KSA, an Atlanta-based consulting firm, points to some answers. Hamilton/KSA cross-tabulated the survey to see what factors were associated with increasing and decreasing margins.

From the employee cafeteria to the emergency department all the way to the executive offices, there are contract firms that will provide hospitals with a spectrum of services. But how do health care executives decide whether this is the right option for their hospital?

How will physician payment reform affect hospitals? The speculation on the law's effects is just beginning in earnest. But a number of health care experts predict that the physician payment reform law does not bode well for hospitals. In fact, some hospitals are already receiving requests from physicians to renegotiate contracts to make up for expected shortfalls in income, and others are examining revenue streams to determine the impact of the switch from high-tech and surgical procedures to more primary care-oriented procedures.

Last spring, executives at Charles E. Still Osteopathic Hospital, Jefferson City, MO, distributed individual practice profiles to each member of the medical staff. The physicians threw the computer printouts into the nearest trash can. However, things have improved since then, and the physicians eventually became intrigued by the data. Hospital CEOs nationwide can identify with this experience. According to Hospitals survey data, 51 percent of hospital executives are generating practice profiles for medical staff members, but of this number, only 55 percent are sharing the data with the physicians. The question is: What's the best way to collect and share this profile information? This issue's cover story looks at how several hospital executives answered this question.

Software products designed to speed the billing process range from systems that prompt admissions personnel to comply with the terms of up to 3,600 separate managed care contracts to programs that support electronic billing via telephone.

Because of the business community's increased involvement in the health care sector, hospitals' planning functions are beginning to resemble those of major corporations.

The question of the extent to which a hospital should be operated as a business has had greater significance in recent years as financial pressures on hospitals have increased. To a large degree, the controversy surrounds the hospital's role in the community and its responsibilities to the public.