CHAPTER 4Community Relations83 CASE 4-2COMMUNITY RELATIONSHIPS MAINTAINED DURING HOSPITAL CLOSING Throughout the 1980s and early 1990s,business and the government trimmed whatever fat there was from the healthcare system.In 1997,Congress passed the Balanced Budget Act in an attempt to reform Medicare and trim waste from the system.But cuts went billions of dollars beyond expectation.Now, the healthcare system is in a financial crisis. Health premiums aren’t paying for the cost of services.Hospitals are being squeezed by managed care companies that are having their own financial troubles.One consequence is the closing of hospitals. MERCY HOSPITAL–DETROIT’S STRUGGLE The east side of Detroit is among the most troubled urban areas in the United States, struggling with a multitude of social and economic challenges.Mercy HospitalDetroit was an important anchor in this neighborhood,not only providing access to healthcare,but also security,employment, leadership,and a place for social interaction.It relied heavily on Medicare, Medicaid,and other government sources for its business—nearly 80 percent of its total admissions. In the early to mid-1990s,Mercy Hospital–Detroit found it increasingly difficult to maintain its fiscal health;operating losses were supplemented by the hospital’s parent company,Mercy Health Services (MHS).1Then,in 1997,the Balanced Budget Reconciliation Act severely reduced Medicare and Medicaid reimbursements. The already struggling hospital was devastated by the cuts.Losses of $1.5 million per month began to mount.The federal and state funding cuts similarly affected operating margins at Mercy’s other hospitals.The MHS Board was faced with system-wide financial constraints that put the system’s bond rating at risk.Operating losses at Mercy Hospital–Detroit totaled nearly $100 million from 1990–2000. In the hope of finding a buyer,a series of