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December 18, 2024

CHA report: CT hospitals continue to face financial challenges

Contributed
By David Krechevsky

Connecticut’s acute-care hospitals continued to have negative operating margins in 2023, due in part to the growing burden of low reimbursement from Medicare and Medicaid, according to a report released Wednesday.

The analysis of hospital finances was performed by Chicago-based healthcare economics firm Kaufman Hall on behalf of the Connecticut Hospital Association (CHA). The firm reviewed and analyzed data for 2023, the latest available, which was provided by the CHA for all 27 short-term, acute care hospitals in the state.

According to the report, Connecticut hospitals produced a combined operating margin of -0.5% in 2023, an improvement from a -1% total operating margin in 2022, but significantly behind hospitals nationwide and in the Northeast and Mid-Atlantic regions.

According to the report, the national operating margin in fiscal 2023 was 2.6%, while the margin for the Northeast and Mid-Atlantic regions was 2.2%.

In addition, the report said:

  • The 27 hospitals continued their losses in 2023, reporting a combined $76 million loss in operating income.
  • Operating expenses increased 6.5%, or $1 billion, in 2023 from a year earlier, a higher rate of growth than the national and Northeast and Mid-Atlantic levels. Nearly all cost categories increased more than for the Northeast, Mid-Atlantic and national medians in 2023.
  • Connecticut hospitals’ net operating revenue increased by 7.3% in 2023 from a year earlier, but only by 3% at the median, significantly less than the national median, increasing the strain on providers dealing with rising expenses.
  • Connecticut hospitals were slightly less dependent on contract labor in 2023 as compared to 2022, but still used contract labor more often compared to hospitals nationally, due in part to “significant, persistent” state workforce shortages.
  • The report also noted that Medicare and Medicaid payment updates have not kept pace with the cost of care. In 2023, Connecticut hospitals incurred nearly $1.4 billion in Medicare losses and $1.43 billion in Medicaid losses, the report states.

“Medicaid underpayment increases burdens, harms access and drives up patient costs,” the CHA said. “While expenses have risen dramatically, payments for the ballooning cost of care from government programs including Medicaid and Medicare have not kept pace.”

The organization said the Medicaid and Medicare populations in Connecticut make up “a larger and growing percentage of the state’s payer mix,” and added that low Medicaid reimbursement rates “will only further exacerbate a slower recovery and margin challenges.”

Connecticut hospitals also face significant challenges “when commercial insurers and Medicare Advantage payers delay, withhold, or deny payment for necessary services or impose needless and costly administrative requirements,” the CHA said.

Along with the report, the CHA offered suggestions for improving the financial health of Connecticut hospitals. Those include: 

  • Ensuring the state Medicaid program pays rates that cover the cost of care.
  • Developing ways to “reimagine Medicaid” to invest in local communities and programs that improve people’s health.
  • Address “unfair national health insurance company administrative practices that raise costs and reduce access to care.”

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