Hospitals still feeling the pains of the pandemic

DATE: June 22, 2022

The Massachusetts HA is advocating for additional government relief to get through the financial crisis hurting Massachusetts hospitals.

Well over two years into the Covid-19 pandemic, Massachusetts hospitals are still battling a financial crisis experts say is putting the future of health care at risk. Now those hospitals are hoping the government can provide more support.

The issue comes down to tight operating margins, forcing the health care system into a bath of red ink while still trying to mitigate the ongoing crisis from the pandemic.

The rise in Covid cases from the omicron variant was the worst period for hospitals' bottom lines yet, with Massachusetts hospitals losing more than $430 million in January and February alone, according to the latest hospital-finance data from the Massachusetts Health and Hospital Association (MHA).

Further, according to a survey of MHA members, median operating margins stood at -10% in January among responding hospitals and at -9% in February. 

Effects on revenues during those months included not only the omicron surge, but also the pause in elective surgeries and the escalation of staffing costs amid the ongoing workforce shortage. Just like everyone else, hospitals are also impacted by inflation and other global economic hardships such as supply-chain delays and product shortages.  

“There was some relief funding provided by the state of late through the state ARPA grants, which is going to help mediate that, but it's not certainly not going to solve the total losses hospitals have experienced throughout the entire pandemic, even when you consider the substantial federal relief that's been provided over the years," Daniel McHale, MHA's vice president of healthcare finance and policy, told the Business Journals.

Razor-thin hospital margins

Hospitals received $405 million in federal and state Covid relief funds to offset lost revenues and increased expenses in fiscal 2021, according to Center for Health Information and Analysis (CHIA). 

CHIA also reported that hospitals saw a statewide 1.2% operating margin in fiscal 2021, meaning that their budget to function is tight. Hospitals cannot employ the same tactics as other industries to confront the problem, such as layoffs, because they need staff to stay open. Non-operating funds are also in flux, with so many investment funds reliant on the now-volatile stock market. Typically, non-operating budgets are used for hospital updates so facilities can stay modern — an imperative in health care. However, the current downturn of the public markets could hamper investment returns and, as a result, some modernization projects.

With such thin margins, they are left to advocate for government support.

"We're really hopeful and appreciative of the concern and recognition by Gov. Baker as well as the Legislature, in terms of recognizing this state of hospitals and the need to do more," McHale said.

Michael Sroczynski, MHA’s senior vice president of government advocacy, said if additional relief isn’t secured, it can impact the future of health care across the spectrum. 

MHA is not alone in its advocacy — the American Hospital Association has also pushed for more federal support.

"The pandemic has clearly demonstrated that America cannot be strong without its hospitals and health systems being strong," a recent op-ed from Lisa Kidder Hrobsky, AHA's senior vice president of federal relations, advocacy political affairs, government relations, read. "We do continue to urge Congress to provide much needed additional support to address these challenges."

 By Cassie McGrath  –  Reporter, Boston Business Journal June 21, 2022