While the operating margins of some hospitals have improved this year, others are facing a different reality.
Five hospitals have permanently shut their doors in the last month, painting a bleak picture of the financial struggles interwoven in the U.S. healthcare system. The closures highlight the financial, economic, and workforce challenges many health systems are struggling with, but also offer critical lessons for hospital CFOs.
The five hospitals that are closing:
Community Memorial Hospital in Hicksville Ohio. After getting caught up in a fraudulent laboratory agreement, facing two cyberattacks and being unable to secure a bankruptcy filing, the rural hospital permanently closed on Aug. 31 after temporarily closing in May due to financial challenges.
Nashoba Valley Medical Center in Ayer, Massachusetts. Nashoba Valley Medical Center also closed on Aug. 31, laying off almost 500 employees.
MercyOne in Des Moines, Iowa. MercyOne Primghar Medical Center will close on Sept. 30 due to economic and workforce challenges. It will also be closing its family medicine clinic in Urbandale.
Stanislaus Surgical Hospital in Modesto, California. Stanislaus Surgical Hospital will be permanently suspending its operations on Sept. 14. The closure will lay off 160 employees and comes after CMS ended the provider’s agreement due to noncompliance with various participation conditions in the agency's MediCal and Medicare programs.
Carney Hospital in Boston, Massachusetts. The hospital, owned by Steward Health Care, closed on Aug, 31, totaling in 753 employee terminations. After seeking Chapter 11 protection in May the health system is still trying to offload its 31 hospitals in a crisis that has shook the Massachusetts community.
The CFO Takeaway
For CFOs, these closures underscore the importance of strategic financial management and adaptability. Careful financial planning, diversifying revenue streams, and proactively addressing workforce shortages are crucial steps to mitigate risks that could result in closures. Moreover, CFOs must ensure their organization is maintaining compliance with evolving regulations and staying ahead of economic trends can help hospitals navigate these turbulent waters.
Cybersecurity is another issue, particularly for rural health systems. With the rising number of cyberattacks, CFOs should look to invest in high quality cybersecurity measures to lower their risk. Though without proper funding, this strategy can be strenuous for rural hospitals. A call for targeted funding for rural hospital cybersecurity may need to be heard, and policymakers will need to act.
Leaders must also advocate for policies that address the systemic issues contributing to these closures, like improved reimbursement rates and more general targeted funding for rural and underserved areas. As the industry continues to face these challenges, a strategic approach and collaborative effort will be essential for ensuring that hospitals can continue to provide essential services to their communities.
Marie DeFreitas is the CFO editor for HealthLeaders.
KEY TAKEAWAYS
Many recent hospital closures have been primarily driven by severe financial strain.
Economic downturns in certain regions and significant workforce challenges are also pivotal in driving hospital closures.
Increasing regulatory requirements impose significant financial and operational burdens on hospitals, particularly rural hospitals, contributing to their closure.