Median hospital and health system operating margins plunged by more than $190 million for the first six months of 2023, with average losses almost doubling from 2022, according to Nov. 13 report from the Minnesota Hospital Association.
Editor's note: The data comes from more than 70 hospitals that are members of the MHA. It includes both large health systems and small rural hospitals in Minnesota.
Four things to know:
1. Median hospital operating margins declined from -.5% in 2022 to -2.7% in the first half of 2023, with 67% of hospitals and health systems reporting negative operating margins. This is up from 55% of hospitals that posted negative margins during the same period in 2022.
2. Labor costs increased 7%, and supply and service costs grew by 6% in the first half of the year.
3. Almost a quarter of hospitals and health systems reported labor costs rising by double digit percentage points, and a third of hospitals said supply and service costs had risen by more than 10% over 2022.
4. The losses also correspond to a rise from 62% to 64% in the proportion of Medicare and Medicaid patients reported by nearly every hospital. The MHA argues that these federal programs continue to reimburse providers well below the cost of providing care, underpaying an estimated 27% below cost for Medicaid, and 20% below cost for Medicare.
"Workforce shortages, cuts in the federal 340B drug pricing program, persistent delays in discharging patients to step-down care, and a crisis in behavioral and mental healthcare are adding to the grave financial challenges hospitals and health systems are facing," MHA President and CEO Rahul Koranne said.