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Hospitals Still Plagued By Excessive Financial Challenges, AHA Finds

Analysis  |  By Amanda Schiavo  
   April 24, 2023

There has been a 258% increase in total contract labor expenses for hospitals in 2022 compared to 2019.

New data from the American Hospital Association has found that hospitals and health systems are dealing with an increase in financial pressures that are now putting patients’ access to care at risk.

The AHA found that expenses across all healthcare departments saw double-digit increases in 2022 when compared to pre-pandemic levels. These expenses include workforce, drugs, medical supplies, and equipment, as well as other essential operational services like IT, sanitation, facilities management, and food and nutrition services. These issues resulted in 2022 being the most financially challenging year for hospitals and health systems since COVID-19 first hit the U.S.

The report found that overall hospital expenses increased by 17.5% between 2019 and 2022, outpacing Medicare reimbursement, which only grew by 7.5% during the same period. Labor costs, which typically account for half of a hospital’s budget, grew by 20.8% between 2019 and 2022. The growth in labor expenses was primarily the result of a rise in reliance on contract staffing. There has been a 258% increase in total contract labor expenses for hospitals in 2022 compared to 2019, according to AHA research.

Drug prices exploded during this time, with the median price of a new drug exceeding $200,000 for the first time ever, more than triple the median household income in the U.S. Price increases for drugs that already exist have continued to outpace inflation, according to the AHA report. This resulted in a 19.7% increase in drug expenses per patient between 2019 and 2022. Additionally, hospital supply expenses per patient increased by 18.5% between 2019 and 2022, this outpaced any rise in inflation by about 30%.

"Rising costs for drugs, supplies, and labor coupled with sicker patients, longer hospital stays, and government reimbursement rates that do not come close to covering the costs of caring for patients have created a dire situation for hospitals and health systems," AHA President and CEO Rick Pollack, said in the report. "This is not just a financial problem; it is an access problem. When healthcare providers cannot afford the tools and teams they need to care for patients, they will be forced to make hard choices and the people who will be impacted the most are patients. We can’t let that happen. Congress and others must act to preserve the care our nation needs and depend on."

Amanda Schiavo is the Finance Editor for HealthLeaders.

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