A recent op-ed in the online publication STAT (Turn off the spigot for hospitals’ COVID-19 relief funding) contains blatant factual inaccuracies but also omits critical information about hospital and health systems’ finances and input costs.
To start, the authors incorrectly state that the federal government allocated more than $170 billion to hospitals through the Provider Relief Fund (PRF). While a sizable percentage of these funds did go to hospitals and health systems, other provider types, such as physicians and dentists, also received funds through this pool. In addition, the losses hospitals have incurred throughout the pandemic are far greater than the relief and support they have received through the PRF and other measures.
Further, under the current PRF allocation, hospitals and health systems will not receive any funds for expenses and lost revenue from the massive delta and omicron surges that spiked COVID-19 cases and hospitalizations to record high levels. In fact, more than half of all COVID-19 hospitalizations occurred during these two surges, putting an incredible strain on hospitals and health systems and their caregivers and other essential workers. While hospitalizations have declined since the record peaks during the omicron surge, cases have recently spiked across the country.
We appreciate the funds from the PRF, along with other support and relief from Congress and the Administration, that have been a lifeline to many hospitals. However, our field is not out of the woods yet, with more than a third of hospitals nationwide operating with negative margins. Kaufman Hall’s April National Hospital Flash Report shows hospitals’ and health systems’ operating margins were negative for a third consecutive month. The median year-to-date Kaufman Hall Operating Margin Index was -2.43% in March. And, according to the Fitch credit rating agency, “This first quarter of the calendar year here is going to be just one of the worst for most of our providers.”
A recent report from the AHA examines the tremendous growth in a variety of input costs for hospitals and health systems, including surging expenses for workforce, drugs, supplies and equipment, as well as the impact of skyrocketing economy-wide inflation. These surges in input costs, along with ongoing challenges from the COVID-19 pandemic and Medicare payment cuts, have continued to strain the resources the hospital field needs to care for their patients and communities.
- Hospital employment is down nearly 100,000 from pre-pandemic levels according to BLS data. At the same time, labor expenses per patient increased 19.1% through 2021 compared to 2019 levels. Labor costs, which include costs associated with recruiting and retaining employed staff, benefits and incentives, account for more than 50% of hospitals’ total expenses.
- Median hospital drug expenses by the end of 2021 were 36.9% higher per patient compared to the end of 2019.
- Overall, supply expenses for hospitals were 20.6% higher per patient by the end of 2021 compared to 2019.
The authors also say, “hospitals don’t deserve special treatment.” Yet, the truth is that hospitals are different than other health care providers in that they are open 24/7 and provide services to anyone who walks through their doors, often dealing with life or death situations where patients require intensive, time-sensitive care. In addition, and important to the current discussion on inflation and rising prices, the majority of payments to hospitals, through Medicare and Medicaid, are fixed and non-negotiable, even though both programs pay hospitals less than the cost of providing care.
The pandemic has clearly demonstrated that America cannot be strong without its hospitals and health systems being strong. As the authors’ note, we do continue to urge Congress to provide much needed additional support to address these challenges, including reversing harmful Medicare cuts, replenishing the Provider Relief Fund, granting flexibility on accelerated and advance Medicare repayments, and extending or making permanent critical waivers that have improved patient care.