A report from the American Hospital Association found that rising national financial expenses could impact healthcare access.
June 2023- The Journal of Healthcare Contracting
From masks and social distancing to Zoom work and school, the pandemic undeniably shifted the way society functions. While the world strives to return to pre-pandemic normalcy, COVID-19 has resulted in lasting impacts for American hospitals and health systems.
Health systems continue to face significant challenges post-pandemic such as rising costs for labor, supplies, and drugs, workplace shortages, sicker patients, and longer hospital stays. These factors have all increased pressure on the national healthcare system. Overall hospital expenses have increased by 17.5% between 2019 and 2022, according to a 2023 report from the American Hospital Association (AHA).
“This is not just a financial problem; it is an access problem. When healthcare providers cannot afford the tools and teams they need to care for patients, they will be forced to make hard choices and the people who will be impacted the most are patients,” said AHA President and CEO Rick Pollack.
In 2022, over half of hospitals ended the year operating at a financial loss, according to the AHA report. So, what are the causes of national financial challenges in healthcare?
Increased expenses
Since late 2019, the national healthcare system has witnessed financial devastation while battling the COVID-19 pandemic. Costs for labor, drugs, and supplies for hospitals and healthcare systems have increased significantly. The substantial rise in patient volume during the pandemic, in addition to the deferral of care until after disease risk had diminished, have led to immense financial burdens for healthcare systems.
Healthcare demand has also significantly increased since 2019, and medical expenses have reflected that. Drug companies have responded to higher demand by increasing prices for pharmaceutical products, and the need for sophisticated medical supplies like PPE, ventilators, and respirators have resulted in significant fees for hospitals.
Hospitals rely on the global supply chain and are therefore subject to inflation, making expenses for needed medical products much higher. Supply chain disruptions impact manufacturing, packaging, and shipping costs that lead to higher overall prices for hospitals.
As a result of factors including inflation, the need for specialized products, and labor costs, hospital supply expenses per patient increased 18.5% between 2019 and 2022, outpacing increases in inflation by nearly 30%, and hospital expenses for emergency services supplies increased by nearly 33%, according to the AHA report.
Workplace shortages
National healthcare worker shortages have resulted in access to care hurdles for patients. Healthcare staff are emotionally and physically burnt out from pandemic-related challenges, are retiring earlier, and are seeking higher pay and more work flexibility within the profession.
Healthcare staff are in short supply while patient volume remains high, and hospitals have been unable to discharge patients to other care settings such as nursing facilities and outpatient centers, creating hospital beds that are occupied without reimbursement.
Hospitals have increasingly turned to healthcare staffing agencies to meet the demand for nurses and healthcare workers. Due to a greater reliance on staffing agencies to meet patient demand and fill workforce gaps, labor costs increased 20.8% between 2019 and 2022, according to the AHA report.
Non-labor expenses
Costs for healthcare support systems have also risen significantly due to inflation. Operational expenses such as information technology (IT), food and nutrition, and environmental services and facilities have increased 18% between 2019 and 2022, according to the AHA report.
Higher patient volume has led to additional operational and service fees in healthcare. As the cost of food has increased, food service costs for hospitals have gone up, with food and nutrition service expenses per patient growing over 15% between 2019 and 2022. Laboratory expenses were also up 27.1% in 2022, according to the AHA report.
Administrative costs are 31% of spending in healthcare, 82% of which can be attributed to billing and insurance, according to the AHA report. Hospitals have been forced to cut costs elsewhere because of overwhelming administrative and insurance fees. Rural hospitals especially deal with the impacts of rising financial costs, with many being forced to close their doors as a result of higher expenses – 143 rural hospitals have closed between 2010 and 2022, with 19 closures occurring in 2020 alone, according to the AHA.
Access to necessary health services for patients is at risk because of increased costs. The pandemic brought an unprecedented set of challenges to health systems, and access to affordable care has suffered as a result. The healthcare industry continues to navigate these challenges by calling on national policymakers for assistance, according to AHA.