Half of hospitals will show negative margins in 2022

Photo: Reza Estakhrian/Getty Images

The COVID-19 pandemic continues to financially challenge hospitals and health systems – not just in the continued number of hospitalizations, but in added expenses for labor and supplies.

"COVID-19 continues," Rick Pollack, AHA president and CEO, said during a briefing on Thursday. "We are now dealing with the aftershocks and the aftermath of the (greatest) public health crisis of the century."

While American Rescue Plan funds aided hospitals at the height of the pandemic, "not a dime" has addressed the Delta or Omicron variants, Pollack said.

WHY THIS MATTERS

The AHA has long called for additional federal funding, but federal support has tapered off, Pollack said.

A Kaufman Hall report said America's hospitals remain under severe financial pressure from labor costs, supply chain issues and inflation.

The former top priority for hospital executives was the workforce, said Kaufman Hall Senior Vice President Lisa Goldstein, who spoke during the briefing. That has changed to a priority for financial stability.

Kaufman Hall analyzed results and projections for the rest of 2022 based on responses from 900 hospitals.

Financial margins in 2022 will remain depressed, Goldstein said. Expenses are expected to remain elevated from prepandemic levels.

Contract labor has pushed staffing costs above what is typically half of a hospital's expense, she said. While wage rates have dissipated since April, they are not expected to return to prepandemic levels.

The optimistic view is for a 37% change in operating margins; the more pessimistic view puts that at 133%.

Either way, Goldstein said, "Hospitals will lose billions." 

One out of two hospitals will show negative operating margins in 2022, she said.

Hospital CEOs added their voices.

"We're sending up a distress flare," said Michael Slubowski, president and CEO, Trinity Health in Michigan, which serves a high number of patients who have Medicare or Medicaid coverage.

Hospitals in the health system are eliminating beds, reducing ER capacity or decreasing services such as behavioral health, he said.

In some locations, as many as 25% of beds are off-line due to nurse staffing shortages, Slubowski said.

Patients are waiting weeks for scheduled surgeries, and some emergency rooms have an 8-hour wait, he said. The rate of patients leaving the ER before being seen has doubled since early 2020. Because patients are delaying care, those coming into the hospital are sicker.

"Most hospitals are one surge away from crisis," Slubowski said.
 
THE LARGER TREND

In May 2021, the AHA and other hospital groups requested the Department of Health and Human Services distribute at least $24 billion that remained in the $178 billion COVID-19 relief fund meant for providers.

In January, the American Hospital Association sought at least $25 billion for hospitals to help combat workforce shortages and labor costs. The Department of Health and Human Services released $2 billion in additional funding for hospitals.

Much of the federal funding after the first tranche released for hospitals went to specific areas, such as aid for rural healthcare.

Twitter: @SusanJMorse
Email the writer: SMorse@himssmedia.com