SACRAMENTO (April 12, 2023) — The latest report from national health care management consulting firm Kaufman Hall shows that one in five California hospitals — dozens throughout the state — is at risk of closure. Hospitals have faced a perfect storm of COVID-related losses, crippling inflation, and systemic underfunding by government payers — Medi-Cal and Medicare. Collectively, these hospitals care for millions of Californians a year.
“Hospitals were able to weather the initial stages of the pandemic, but their situation has deteriorated quickly,” said Erik Swanson, who leads Kaufman Hall’s Data and Analytics group. “The risk of hospital closures in California is the highest it has been since the pandemic began.”
The report, released this week, shows that in 2022, expenses to provide hospital care ballooned to $23.4 billion compared to pre-pandemic levels. Unlike other services — restaurants, airlines, and grocery stores — hospitals are unable to raise their rates to cover increased costs. This is precisely why care for millions is at risk as hospitals face difficult decisions about whether to shutter services like maternity care just to keep the lights on, or consider bankruptcy and outright closure. In addition to the massive inflationary increases, hospitals also sustained $8.5 billion in losses last year, on top of the $12 billion in losses (even after federal relief) during the pandemic. There’s no way to balance this budget.
“The real cost of this crisis — if help does not arrive soon — will be borne by the people of California, whose health care services will erode, slowly in some areas, and all at once in others,” said Carmela Coyle, President & CEO of the California Hospital Association. “For some, this will lead to longer emergency department wait times, farther distances to travel for care, and ‘care deserts’ for services like maternity care and behavioral health. For others, the change will be more severe with tragic examples where people can’t get to the next nearest hospital for care.”