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The financial stability of America’s hospitals and health systems is at risk as the costs of caring continue to rise
The financial stability of America’s hospitals and health systems is at risk as the costs of caring continue to rise
- Collection:
- Health Policy and Services Research
- Contributor(s):
- American Hospital Association, issuing body.
- Publication:
- [Washington, D.C.] : American Hospital Association, April 2023
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Economics, Hospital -- statistics & numerical data
Economics, Hospital -- trends
Hospital Costs -- statistics & numerical data
Hospital Costs -- trends
Equipment and Supplies, Hospital -- economics
Personnel, Hospital -- economics
United States - Genre(s):
- Technical Report
- Abstract:
- After three years of unprecedented challenges and caring for millions of patients, including over 6 million COVID-19 patients, America’s hospitals and health systems are facing a new existential challenge--sustained and significant increases in the costs required to care for patients and communities putting their financial stability at risk. A confluence of several factors from historic inflation driving up the cost of medical supplies and equipment, to critical workforce shortages forcing hospitals to rely heavily on more expensive contract labor, led to 2022 being the most financially challenging year for hospitals since the pandemic began. Moreover, sustained demand for hospital care with patients coming to the hospital sicker and staying longer has exacerbated these challenges. These challenges have been particularly financially devastating for hospitals and health systems because they come on top of two years of battling the COVID-19 pandemic. Hospitals and health systems have been on the front lines delivering care to patients, acting as de facto public health agencies, and incurring significant increases in costs from a range of inputs, including labor, drugs, supplies and administrative activities associated with burdensome billing and insurance tasks. In addition, as many individuals deferred care during the pandemic, hospitals saw a dramatic rise in patient acuity. At the same time, workforce shortages across the health care continuum have left hospitals unable to discharge patients to other care settings (e.g., skilled nursing facilities) creating patient bottlenecks with hospital beds occupied without any reimbursement. These unfortunate realities have resulted in a 17.5% increase in overall hospital expenses between 2019 and 2022, according to data from Syntellis Performance Solutions, a health care data and consulting firm. Further exacerbating the situation is the fact that the staggering expense increases have been met with woefully inadequate increases in government reimbursement. Specifically, hospital expense increases between 2019 and 2022 are more than double the increases in Medicare reimbursement for inpatient care during that same time. Because of this, margins have remained consistently negative, according to Kaufman Hall’s Operating Margin Index throughout 2022. In fact, over half of hospitals ended 2022 operating at a financial loss--an unsustainable situation for any organization in any sector, let alone hospitals. So far, that trend has continued into 2023 with negative median operating margins in January and February. According to a recent analysis, the first quarter of 2023 saw the highest number of bond defaults among hospitals in over a decade. This also is one of the primary reasons that some hospitals, especially rural hospitals, have been forced to close their doors. Between 2010 and 2022, 143 rural hospitals closed--19 of which occurred in 2020 alone. Finally, despite these cost increases, hospital prices have grown modestly. In fact, in 2022, growth in general inflation (8%) was more than double the growth in hospital prices (2.9%). This report will examine the magnitude of cost increases over the last year, and the impact these increases have had on the financial stability of the hospital field.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-ND license. (More information)
- Extent:
- 1 online resource (1 PDF file (9 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 9918663782406676 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/9918663782406676