Hospital and health system executives are cutting service lines operating at a loss to shore up finances, address staffing shortages and focus on more in-demand services. But scaling back certain services has led to reduced access to care for patients, particularly for rural or underserved populations.
High labor costs and financial losses have put many hospitals and health systems in a precarious position with lenders, who are demanding that dwindling cash reserves be used as a guarantee for bondholders.
The average days cash on hand declined by 44 days last year to 216 days on average, down 17 percent year over year, according to a July 25 Fitch Ratings report.
To preserve cash, many hospitals and health systems are reducing or eliminating services that have been operating at a loss.
In the last six months, Becker's reported on more than 40 hospitals that either closed medical departments or ended services at their facilities. Maternity care, pediatrics and behavioral health are examples of such services hospitals are cutting.
Some health systems are also closing emergency departments. Philadelphia-based Jefferson Health ended acute care, general surgery and emergency services at Einstein Medical Center Elkins Park on June 30. Hartford City, Ind.-based IU Health Blackford Hospital also plans to close its emergency department in addition to Adirondack Health's emergency department in Lake Placid, N.Y.
Some hospitals have been unable to adequately shore up finances. Five hospitals filed for bankruptcy this year, with more likely to follow suit in the third and fourth quarters as financial challenges and economic headwinds persist while revenues have yet to return to pre-pandemic levels.
Since January, nine hospitals have closed, with three announcing closures in August alone. In 2022, 19 hospitals either closed or filed for bankruptcy.
The good news for hospitals is that patient volumes are picking up and contract labor expenses are falling, but 2023 will remain a challenging year for health systems, many of whom are "not out of the woods yet," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, told Becker's.