Hospitals in the RED

By Staff Reporters

Hospitals this year are seeing more red than black as growing financial challenges, like spiked labor costs and inflation on medical supplies, puts them on pace to have the worst financial performance into the pandemic thus far.

More than half of hospitals (53% of more than 900 sampled) are projected to have negative margins by the end of the year, compared to 39% in 2019, according to a September report from management consulting firm Kaufman Hall, on behalf of AHA. The firm put the median operating margin for hospitals at about -1%, which could mean service cuts, and for more vulnerable hospitals, including rural ones, closing their doors.

But why is the financial outlook so bleak for hospitals? A few factors are conspiring:

Labor costs: The top reasons hospitals are struggling financially in 2022 are “labor, labor, and labor,” said Kevin Holloran, senior director at Fitch Ratings. The healthcare labor shortage doesn’t just extend to nurses, but across the board.

Rising supply prices: Blame inflation. AHA reported that the “costs for energy, resins, cotton, and most metals surged in excess of 30%” between fall 2020 and early 2022.

Sicker patients, longer stays: Intensive care units across the country were overwhelmed with Covid-19 patients at the outset of the pandemic, but more recently hospitals have been caring for sicker non-Covid patients, said Aaron Wesolowski, AHA’s vice president for policy research and analytics



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