WASHINGTON – As a result of a bad U.S. economy, fewer Americans are seeking hospital care and more need help paying for care, according to new report from the American Hospital Association.

The report noted that hospitals, which employ 5 million people nationwide, could be facing uncertain times as their financial health falters and ability to borrow funds for improving facilities and updating technology is squeezed.

The report is based on survey results from 736 hospitals and information from DATABANK, a Web-based reporting system used in 30 states to track key hospital trends.

Many hospitals are beginning to see the effects of the economic downturn, with more than 30 percent of survey respondents reporting a moderate to significant decline in patients seeking elective procedures and nearly 40 percent reporting a drop in admissions overall.

The majority of hospitals surveyed also noted an increase in the proportion of patients unable to pay for care. Uncompensated care was up 8 percent from July to September, versus the same period last year, according to the report.

"The economic downturn has meant real pain for families and communities," said AHA president and CEO Richard Umbdenstock. "For many, a pink slip also means losing vital health coverage and represents tough choices about the family budget. This report underscores those decisions as people put off needed healthcare, as well as the challenges hospitals face as they work to meet the needs of their community."

Umbdenstock said hospitals have seen the immediate impact of the economic downturn in other ways. According to the report, total margins fell to negative 1.6 percent in the 3rd quarter of 2008 versus positive 6.1 percent during the same period last year.

Hospitals rely on investment income to help make ends meet, especially since government payers do not cover the costs of care. But recent turmoil in the stock market has turned investment gains to losses, further worsening hospitals' financial condition.

Medicaid expenditures - the largest and fastest growing portion of many state budgets - increase even faster during economic downturns as enrollment grows and state tax revenues drop. State and federal budget difficulties have raised worries about potential cuts to Medicare and Medicaid, which cover half of the patient care provided by the nation's hospitals.

According to the survey, hospitals are making or considering cutbacks to weather the economic storm, including cutting administrative costs (60 percent), reducing staff (53 percent) and reducing services (27 percent).

"Hospitals are a critical part of our nation's economy as the second largest private sector source of jobs," said Umbdenstock. "In addition, every dollar spent by a hospital supports more than $2 of additional business activity in a community. But cuts to Medicare and Medicaid may stunt hospitals' ability to help drive economic growth. The economic crisis is taking its toll on patients, communities and hospitals alike."

The report also shows that the credit crunch is increasing the costs of borrowing money, making it more difficult for hospitals to find the financing for facility and technology improvements. Hospitals saw interest payments on borrowed funds increase by an average of 15 percent from July to September, versus the same period last year.

The report indicates hospitals have delayed or will delay capital investments in the near future:

• 56 percent are holding off on renovations or plans to increase capacity or considering postponements;

• 45 percent are delaying the purchase of clinical technology or equipment; and

• 39 percent are putting off investments in new information technology.

The report was based on data from two major sources. A survey, "The Economic Crisis: Impact on Hospitals," provides data from 736 hospitals from late October 2008 through Nov. 10, 2008.  DATABANK figures represent early results from 557 hospitals reporting data for July through September 2007 and 2008 as of Nov. 11, 2008.