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.
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.
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.
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.
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.
And, 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.
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.”