New Haven Register (New Haven, CT)
Report: CT hospital finances left reeling from pandemic, inflation
Connecticut hospitals faced their worst year financially in 2022 since before the coronavirus struck, facing shrinking revenues, sicker patients and surging labor and other costs, according to a new study released Tuesday by the Connecticut Hospital Association.
Hospitals lost money in 2022, with expenses outpacing revenues by about 1%. Across the industry, that’s down $164 million from 2019, when hospitals enjoyed a positive operating margin of 4.6%.
“Hospitals and health systems are navigating unprecedented financial challenges, and the pandemic continues to have a lasting impact on health care across the state,” said Jennifer Jackson, hospital association CEO, who unveiled an analysis from Kaufman, Hall & Associates, a Chicago-based health care management consulting firm, during an online news conference.
“With any business, there’s only so long you can go with not having a profit or having a negative margin,” said Susan Martin, chief financial officer for the Middlesex Health.
Both Jackson and Martin said these pressures are forcing hospitals to curtail programs and defer capital investments, even as many communities are asking them to offer more.
“The pressures are continuing. They feel unrelenting,” Jackson said. “We do need to be concerned about what’s down the road.”
Several factors have combined to squeeze hospitals since the coronavirus arrived in 2020, and while case rates have declined, fiscal challenges aren’t retreating, according to the report.
The Kaufman Hall report found annual expenses by 2022were up $3.5 billion across all Connecticut hospitals compared with pre-pandemic levels.
Labor costs in general are one of the worst culprits. Salary and benefits costs are up 20%, as workers in all fields — not just in health care — are less apt to accept the health care risks of working in a hospital. A40-year high in inflation, reached in the summer of 2022, also put significant pressure on compensation, pushing salary and benefit costs more than $1.3 billion above pre-pandemic levels.
Contract labor costs for hospitals are up $519 million or 61% from those in 2019.
Inflation also has taken a toll on drug and medical supplies — which are up $1.1 billion annually from pre-pandemic levels — while two major revenue sources from the public sector continue to lag well behind the cost of doing business.
Jackson said the federal Medicare program for the elderly currently covers about $1.1 billion less than the service costs Connecticut hospitals incur. Medicaid, a federal program administered and funded partly by states to serve poor patients, yielded a similar $993 million gap in 2022.
Further complicating matters, hospitals in general are dealing with sicker patients, with the average length of stay up 9% since 2019.
Labor shortages sometimes prevent the timely discharge of patients from hospitals, leading to increased expenses for facilities without a matching boost in revenue.
Many people avoided physicals, screenings and other wellness visits during the pandemic, allowing health care problems to advanced unnoticed, said Dr. Syed Hussain, chief clinical officer for Trinity Health of New England.
AndwhileHussain said there’s no definitive evidence yet that the coronavirus pandemic has dramaticallyworsened chronic lung and heart ailments, he added that chronic diseases are on the rise.
This mix of wellness, operational and fiscal challenges doesn’t come with an easy solution. But Jackson said a fix almost certainly will take years, and the industry and state officials must begin developing a holistic solution now.