The latest national snapshot of hospitals’ financial circumstances from Kaufman Hall reinforces something California’s hospitals know all too well: A dire situation is growing even worse.
The report, released Tuesday, contains several grim findings based on data from April:
- The median change in operating margin was down more than 38% compared to March, leading to an overall negative margin of -3.09%. (In California, this means more than 51% of hospitals are operating in the red.)
- Gross operating, inpatient, and outpatient revenues all dropped by about 7% compared to March, due to lower patient volume.
- Expenses declined just 4.3% in April, but even that decline means they are still up by 8.3% compared to last year.
Erik Swanson, senior vice president of data and analytics at Kaufman Hall, sums up the situation well: “Labor shortages, high prices for supplies, and cost increases to treat sicker patients over longer stays are ballooning hospital expenses. With a bleak consensus outlook for the U.S. economy, those factors and their effects could be here for a while.”
For California’s hospitals — already under pressure to complete more than $100 billion in seismic upgrades in a little more than seven years and significantly reduce the rate of health care cost growth into the future — the situation is at once impossible and unfair.
Pair those demands with the fact that federal relief did not even cover half of California’s hospitals’ losses and that the state has provided no relief at all, and hospitals are facing painful choices about where they must make cuts to continue to remain viable.
The road out of this predicament now lies with California’s Legislature, which has an opportunity to provide a softer landing for hospitals that are on the edge of this financial cliff. This can be done through regulatory relief — giving hospitals more time to complete seismic upgrades and providing a reasonable and structured path toward controlling cost growth.
The burden hospitals are bearing is far too heavy, and many are close to their breaking point. Something has to give, and it’s in the hands of California’s elected leaders to choose whether hospitals will be able to be part of rebuilding our state in the wake of the pandemic, or whether they will be a few more numbers added to COVID-19’s wicked toll.