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The Challenging State of Hospital Finances

Inflation, labor costs, uncertain COVID outlook strain U.S. hospitals

September 15, 2022

U.S. hospitals face billions in elevated expenses and an uncertain financial outlook, as the staggering financial toll of the pandemic only intensified during 2022.

A new report released today from the American Hospital Association (AHA) highlights the financial challenges hospitals are facing due to COVID-19 and inflation. The AHA report, prepared by Kaufman, Hall & Associates, LLC, serves as a call to action to support hospitals and protect access to care.

“Ultimately, U.S. hospitals are likely to face billions of dollars in losses in 2022 under both optimistic and pessimistic models, which would result in the most difficult year for hospitals and health systems since the beginning of the pandemic with no foreseeable federal support,” the report said.

With the release of the report, the AHA hosted a media briefing today with Jack Lynch, president and CEO of Main Line Health; Michael Slubowski, president and CEO of Trinity Health based in Michigan; and Peggy Abbott, CEO of Ouachita County Medical Center in Arkansas. The health care leaders emphasized the importance of supporting hospitals during this difficult time.

Among the key takeaways from the report:

  • Red margins:  For all of 2022, it’s projected that 53 percent of hospitals will have negative margins compared to pre-pandemic levels. Hospital margins could decline anywhere from 37 percent to 133 percent this year.
  • Expenses:  The report projects expenses to increase nearly $135 billion from 2021 levels, including $86 billion for labor and $49 billion for non-labor expenses.
  • Inflation challenges:  Hospitals reported significant increases in expenses for supplies ($11 billion), purchased services ($7 billion), and drugs ($1 billion).
  • Contract labor:  Costs for contract labor ($29 billion) remained nearly 500 percent higher than pre-pandemic levels.
  • Quotable:  “While the impact of future waves of COVID-19 or policy changes is unknown, losses will be in the billions of dollars in 2022 for U.S. hospitals with no foreseeable federal support, which would result in the most difficult year for hospitals and health systems since the beginning of the pandemic,” the report said.

With the release of the report, the AHA is highlighting its fall priorities to support hospitals dealing with these difficult challenges.

The AHA report is available to review online.



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