Hospital Sustainability

Pennsylvania hospitals are facing severe challenges to their financial stability that threaten the care they provide and the benefits they bring to their communities. 

Hospitals and Communities are at Risk

Hospitals save lives and provide high-quality care to all who need it, regardless of ability to pay. They lead efforts to improve public health and innovation to advance care. They are often the top job creators and economic engines in their communities.

53% of U.S. hospitals are losing money on care

Hospitals can’t support that mission without financial stability—and that stability is at risk. Continued losses put hospitals at risk of having to reduce services, forgo plans to serve their communities in new ways and, in extreme cases, close facilities.

Financial Challenges

2022 was the most devastating year in recent memory for hospitals’ sustainability. Why? Simply put, payments do not cover the cost of care and have not kept up with rising expenses.

Skyrocketing Costs

Inflation, the COVID-19 pandemic, a national health care workforce shortage, and other factors have caused hospitals' expenses to soar.

By the end of the year, U.S. hospitals were projected to pay $135 billion more in expenses for 2022 than 2021. Expenses of all types remain 20 to 25 percent higher than before the pandemic.

a pair of up arrows indicating expenses increases from 2021 to 2021 of $86 billion for staffing and $49 billion for supplies, drugs, services, and other non-staffing costs

Stagnant Payments

Hospitals can’t shift costs when expenses rise. Payment rates from commercial insurers are negotiated in advance and most hospitals rely on payments from Medicare and Medicaid, which are set by the government.

an infographic with the text - 65% of of Pennsylvania’s general acute care hospitals receive at least half of their care-related revenue from Medicare and Medicaid. But those programs reimburse at less than the cost of care. Hospitals lose 16 cents per dollar from Medicare nationally; 19 cents per dollar from Medicaid in PennsylvaniaAnd, hospitals are absorbing a 2 percent cut to Medicare because of sequestration, which resumed in July 2022, reducing payments to Pennsylvania hospitals by $176 million annually.

Strained Hospitals

This means many hospitals are spending more to provide care than they are getting in reimbursements. A national analysis found:

  • Hospitals’ operating margins were down 102 percent from pre-pandemic levels for the first half of 2022
  • More than half of hospitals were on track to lose money on care by the end of 2022

A ‘Perfect Storm’

A January 2023 report by Health Management Associates found that staffing shortages and rising costs have created a “perfect storm” for Pennsylvania hospitals.

According to the report: “As the post-COVID-19 challenges and disruptions continue, we anticipate hospital financial concerns about liquidity will grow. Pennsylvania hospitals are taking the lead in addressing many of these challenges, but without additional support, it is unclear whether many hospitals will be able to weather the financial disruption this crisis has created, which could, in turn, affect access to care across the commonwealth.”

 

HAP Contacts

For more information, contact John Myers, HAP's vice president, federal advocacy; or Heather Tyler, HAP's vice president, state legislative advocacy. Media inquiries should be directed to Chris Daley, vice president, strategic communications.

 

HAP News

 

June 19, 2024

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More than Care at Stake

When a hospital's sustainability is threatened, access to health care is only the start of what’s at risk in the community. HAP's report, Critical to Communities, Pennsylvania Hospitals' Economic Impact, highlights the many ways hospitals are important to their communities and Pennsylvania.

Critical to Communities, HAP Report


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