When hospitals’ lenders come under scrutiny, their patients feel the pain, too. Facilities whose lenders underwent regulatory stress tests were more likely to readmit patients and forgo some timely or needed treatments, according to a new paper dramatically titled “Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes,” Bloomberg News reported. The study, part of a National Bureau of Economic Research working paper series, highlights how tighter credit to hospitals may be an unintended consequence of the stress tests, which were created to prevent another runaway bout of bank failures and bailouts. It also shows how precarious hospital financing can be. These facilities carry “a substantial amount of debt,” the authors wrote, and are “particularly risky borrowers” with greater-than-average yields and higher municipal-bond defaults. That means they’re a logical place for lenders to cut back if they’re seeking to improve their credit profile. “Affected hospitals exhibit significantly lower attentiveness in providing timely and effective treatment and procedures, and are rated substantially lower in patient satisfaction,” according to the report. Hospitals in that group had a “significant increase” in readmitting patients within a month after discharge, considered a key quality gauge, and in deaths from pneumonia, heart attacks and heart failure. The study examined 3,658 hospitals from 2010 to 2016. Of those, 537 hospitals had lenders undergoing stress tests in the period. They held loans worth an average of $737 million, with maturities of just under five years. The American Hospital Association called the study “dramatically oversimplified” and “riddled with wild assumptions” that don’t reflect the complexity of hospital financing and operations.
