Hospitals and Health Systems Struggling Through 'Most Financially Difficult' Year of Pandemic

"These realities translate into access to services being put in jeopardy and this deserves the immediate attention of policymakers," says Rick Pollack, President, and CEO of the American Hospital Association.

The mounting pressure on healthcare staff and resources is turning 2022 into one of the worst financial years for hospitals and health systems on record.

Over half of the hospitals and health systems surveyed by Kaufman Hall are projected to operate in the red for the rest of this year, limiting access to care for patients and resulting in billions of dollars in losses for these organizations. Fifty-three percent of hospitals are expected to finish 2022 with negative margins relative to pre-pandemic levels, according to the data—which was released by the American Hospital Association. Expenses are also expected to grow through the rest of the year, leading to an increase of almost $135 billion over 2021 levels. Labor expenses are predicted to grow by $86 billion, while non-labor expenses are expected to grow by $49 billion.

To make sure patients have access to care and hospitals across the country are financially strong, the AHA is asking Congress to stop more Medicare cuts from taking effect next year, as well as extend government assistance programs for rural hospitals. The AHA is also asking Congress to make critical waivers permanent and keep payers honest by holding them accountable for plans that raise the cost of and delay access to care.

"The bottom line is America’s hospitals are under severe financial pressure as they experience stark workforce shortages, broken supply chains, and rapid inflation that has increased the cost of care," Rick Pollack, President, and CEO of the AHA said during a media call discussing the research. "These realities translate into access to services being put in jeopardy and this deserves the immediate attention of policymakers at every level of government to ensure that we’re able to keep people healthy, and also maintain essential public services that our communities depend on."

Projections for the rest of 2022 indicate margins will be down 37% relative to pre-pandemic levels, according to the Kaufman Hall, AHA data. More pessimistic projections suggest a possible 133% decline in margins. Projections also show expectations that there will be no additional federal support, yet there is the potential for future COVID-19 variant surges that could cause increased rates of expense growth, sicker patients who have delayed care, aggressive payer negotiations, and increased payer mix of non-commercial payers.

"While we're grateful for the relief that was provided during the pandemic, which was a lifeline, it's important to remember that not a dime that was provided during that period was addressing the Delta and Omicron surges and that accounted for half of all hospital admissions," Pollack said. "I want to make sure that we recognize that while federal relief has tapered off and new payment reductions have kicked in, the fact of the matter is that COVID hasn’t."

Peggy Abbott is the CEO of Ouachita County Medical Center, a hospital in rural Arkansas and she can attest firsthand to the challenges facing organizations like hers.

"Our small hospital is financially challenged and struggling to survive the negative impacts that are created by this historical level of inflation, the increase in supply costs, and labor," Abbott said on the call. "Competing with the agency staffing for clinical staff is contributing to the financial strain and it's impacting our ability to recruit and retain clinical staff. If we don't have nurses, respiratory therapists, and radiologists, we cannot have patients in the bed. And of course, there is the spread between the cost of operating a hospital and the reimbursements from our payers for Medicare and Medicaid, as well as commercial insurance companies and that is causing an incredible strain."

The Kaufman Hall, AHA data highlights the critical situation hospitals are facing and without direct government support, industry leaders are concerned about the future of the American healthcare system.

"The American healthcare system is one of the best in the world and we cannot let it fail," Jack Lynch, president, and CEO of Trinity Health said on the call. "We must continue to make changes on the provider side which will be difficult in an environment where consumers have higher expectations than ever. However, without the care provided to government beneficiaries and appropriate rate increases from commercial payers the ability to assure access to timely care in rural, suburban, and urban communities will be at risk. In my 35 years in healthcare, this is the most fragile I’ve ever seen the American healthcare system."