Do we need more hospitals?

In a rational free market system, the need for hospitals in a particular area would be determined by a combination of market forces and the willingness of entrepreneurs to invest in that kind of business. But, as was discussed in a front page story on the cover of the Albuquerque Journal the influence of market forces in determining hospital need is somewhat minimal — and New Mexico is not (thankfully) — a certificate of need state (in other words, government permission is not necessary).

So, what determines where hospitals are located in New Mexico? According to the article:

The University of New Mexico (one of the 2 hospitals in question) is looking for financing from Housing and Urban Development;

Presbyterian (the other hospital, a non-profit) is asking its employees to help finance the project to the tune of $3 million;

Both hospitals are looking for property tax revenue from Sandoval County to finance operation costs.

So, how will the hospitals make money? Well, one of the most interesting quotes in the article is that “Hospitals often complain Medicare reimbursement aren’t high enough, but at least Medicare pays reliably, and Medicare patients utilize 2.5 times as many inpatient services than the average patient.” So, again, subsidies play a major role.

While Congress looks to rid the American health care system of the last vestiges of free market, the debate over two new New Mexico hospitals is yet another example of how non-market forces predominate.

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2 Replies to “Do we need more hospitals?”

  1. Paul:

    What’s the source of the statistic that “Medicare patients utilize 2.5 times as many inpatient services than the average patient”?

    Since Medicare patients are older than the average patient this would seem logical, but this over-utilization needs to be investigated.


  2. Presbyterian was overbuilt with empty floors and beds when I worked there from 1990 to 2000. Northside was turned into an administrative center. Pres asking its employees to help fund another hospital is appalling.

    There is money in the Presbyterian Foundation coffers that can do that job nicely. The Foundation money was left in good faith by persons who beleived in a local hospital serving New Mexico. Why isn’t that money being used to raise the $3 million instead of asking employees?

    A public audit of the Foundation should be made. Just where does that money go? Can not-for-profit organizations be audited? Pres takes Medicare and Medicaid. Surely there is some accountability somewhere for funds donated for local health care purposes? I would buy daffodils if I was sure the money went for patient care not excessive building schemes.

    Every morning the executives of every hospital in Albuquerque gets a census report telling exactly how many beds are filled and how many are empty. Perhaps that should be made public so taxpayers and hospital employees can see if there really is a need is there for another hospital.

    I wish to remain anonymous.

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