Report: Analysis of the Current Challenges on Pennsylvania Hospitals
Executive Summary
Pennsylvania hospitals are emerging from one the largest health care crises in more than a century, stemming from the COVID-19 pandemic. However, in its wake a confluence of challenges has appeared, placing the health care delivery system in jeopardy. According to an October KaufmanHall report, “2022 is proving to be the most difficult year financially for healthcare providers since the COVID-19 pandemic began in 2020. Staffing shortages, skyrocketing labor costs, continuing supply chain disruptions, inflation, rising interest rates, and volatile markets are pressuring both revenue and expenses.”1 This sentiment was overwhelmingly conveyed in interviews with leaders representing 10 hospital and health systems across Pennsylvania. Many of these challenges are not merely transitory but likely represent a new normal.
Staffing shortages for nurses and clinical care support at hospitals, nursing homes, physician’s offices, and other health care settings are at unprecedented levels, which have created disruptions in care across Pennsylvania. These shortages have contributed to wages being driven up significantly over the past year, while overall inflation hit a 40-year high in June.2 These substantial increases in care delivery expenses have outpaced payment rates from Medicare, Medicaid, and commercial payers, placing considerable strain on Pennsylvania hospitals and health systems.
The Pennsylvania Health Care Cost Containment Council’s (PHC4) latest COVID-19 Disaster Emergency Report continues to show losses for hospitals related to the effects of COVID-19. 3 The report shows that hospitals had COVID-related labor expenses of $293.8 million in the first half of 2022. These represent new expenses used for preventing, preparing for, and controlling COVID-19. Pennsylvania hospitals’ combined expense increases and revenue losses attributable to the pandemic were $678.3 million for the first half of 2022, bringing the total since the start of the pandemic to almost $7.9 billion.
In short, Pennsylvania hospitals and health systems are facing a perfect storm. We outline the significant systemic challenges contributing to Pennsylvania hospitals’ stability further in this 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.
Engaged by The Hospital and Healthsystem Association of Pennsylvania (HAP) to identify the current challenges faced by hospitals in the commonwealth, our interviews with hospitals and health systems point to unsustainable conditions. Interviewees noted that reimbursement from Medicare, Medicaid, and commercial payers are insufficient to overcome the rate of expense increases, and these increases do not appear to be limited to the short term. Most Pennsylvania hospital and health system representatives interviewed said they cannot merely cut costs in order to resolve this financial situation because doing so on the scale required risks affecting the overall service needs of their communities.
Pennsylvania hospital and health system leaders we spoke with consistently referred to the current operating environment as the toughest they have experienced in their careers. The operational and fiscal stresses they face to sustain sufficient access for the patients and the communities they serve present a clear and present dilemma that must be addressed.
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1 https://www.kaufmanhall.com/sites/default/files/2022-10/2022-State-Healthcare-Performance- Improvement.pdf
2 Bureau of Labor and Statistics, June 2022.
3 https://www.phc4.org/reports/finreport/112922/docs/finreport112922.pdf
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Topics: Access to Care, Federal Advocacy, Regulatory Advocacy, State Advocacy, Workforce
Revision Date: 1/11/2023
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