When has inflation ever been so high in recent decades, cost increases so steep for drugs, supplies and equipment and workforce challenges so widespread, all amid a global health emergency? Never, which is why hospitals and health systems on the front lines are now facing unprecedented challenges and pressures.
With one-third of hospitals operating in the red and another one-third barely breaking even prior to the pandemic, hospitals now face severe staffing shortages, supply chain breakdowns, skyrocketing prices for drugs and supplies and near-historic levels of inflation. This tsunami of challenges is exerting tremendous pressure on hospitals and health systems’ ability to provide access to care to their patients and communities. While hospitals appreciate the pandemic relief from Congress, it is essential that Congress help support hospitals to shore up the cornerstone of our nation’s medical care.
First, COVID-19 delivered shock waves, overwhelming our staff and caregivers, while forcing hospitals to spend tremendous amounts to secure personal protective equipment (PPE) and other needed supplies and equipment. Many hospitals also had to shut down nonemergency care—some due to government orders—to continue to provide emergency care and to treat large influxes of COVID-19 patients. Hospitals and health systems quickly set up alternative sites of care, hospital-at-home programs, testing centers and deployed other innovative strategies to care for patients during the pandemic.
However, the pandemic was just the beginning of the operational challenges. According to the U.S. Department of Labor, hospital employment is still down over 40,000 from March of 2020. Simultaneously, per-patient labor expenses rose by nearly 20% from 2019 to 2021. Keep in mind that over 50% of a hospital’s expenses are workforce costs, so even minor changes in labor expenses can have a spiraling impact on a hospital’s budget.
Workforce shortages also intensified during over the last two and a half years. In 2019, hospitals spent an average of 4.7% of their total nurse labor expenses for contract travel nurses, which skyrocketed to 38.6% in January 2022. While staffing agencies have helped hospitals fill gaps during the pandemic, hourly rates of contract staffing agencies shot up by an incredible 213% compared to pre-pandemic times, further straining hospital resources.
According to a report released by the HHS Office of Health Policy, persistent labor shortages are anticipated in the health care sector––and they might get worse. Primary care physicians may be in short supply across 37 states by the year 2025. Not surprisingly, rural areas are projected to be the worst affected in terms of provider availability. An aging health care workforce remains a significant concern—nearly 50% of registered nurses are over 50 years old, and 44% of physicians in 2019 were at least 55 years old. A dearth of clinical sites and qualified faculty to train the next generation of clinical care providers will further exacerbate the access to care issue.
It does not end with workforce issues. Non-labor costs have also escalated:
- Per-patient drug expenses rose by nearly 37% compared to pre-pandemic levels.
- Hospitals spent over 20% more on supplies in 2021 per patient than before the pandemic.
- ICUs and respiratory care departments directly involved in COVID-19 patient care saw a 31.5% and 22.3% jump, respectively, in medical supply costs.
- The average length of hospital stays for patients increased by nearly 10% in 2021 compared to 2019.
Any one of these challenges is alarming on its own. But all of them occurring at once —in tandem with the highest inflation rate in nearly half a century — is a real crisis. Just as policymakers stepped up to help keep hospitals afloat during the early days of the pandemic so they could continue to provide care to patients, so too must our nation’s leaders rise to the occasion now.
To help protect patients’ access care, we continue to call for Congress to:
- Halt cuts to Medicare payments to hospitals, health systems and other providers;
- Extend or make permanent critical waivers that have improved patient care; and
- Hold commercial health insurers accountable for improper business practices —especially those that take caregivers away from the bedside to deal with burdensome administrative hurdles.
These necessary steps will provide critical support as the hospital field contends with a financial crisis, staffing shortages and increasing labor costs. Safeguarding the workforce and financial stability of our frontline care organizations means continued access to quality care for our patients and the wider community. Congress must act quickly to help hospitals and health systems address current challenges — and ensure they can provide needed care in the years to come.
Stacey Hughes is the executive vice president for government relations and public policy for the American Hospital Association.