Texas hospitals warn of rural closures, care delays and service cuts without legislative support

A major Texas hospital group shored up its push for legislative assistance with warnings that nearly 1 in 10 of the state’s hospitals are at risk of closure—roughly twice as many as during the run-up to the COVID-19 pandemic.

Further, the percentage of Texas hospitals with negative margins has “skyrocketed” from 2019’s 33.9% and 2021’s 30.4% to 47.4%, according to new data (PDF) from The Texas Hospital Association that were prepared by Kaufman Hall.

The contributors to Texas hospitals’ dire states are similar to the pressures being felt by other hospitals across the country, explained the trade group’s president and CEO John Hawkins during a press call.

Labor expenses across the state are 20.9% higher than pre-pandemic levels, while the costs of medical supplies are 8.5% higher.

Volumes still lag pre-pandemic numbers while patient days and average length of stay have increased, suggesting many patients are still avoiding care as those who do seek out services are sicker and more costly, he said.

What’s more, capacity shortages, discharge difficulties and limited behavioral care resources are driving up wait times across emergency departments. This forces many facilities to “board” patients until they can secure an open bed, which Hawkins noted both hampers their care and brings no additional revenue into the hospital under most payment policies.

The result so far has been service line closures that impact Texas residents’ access to prompt care, with outpatient- and community-based services, pediatric care lines and behavioral health often first on the chopping block, he said. Those closures, alongside labor shortages and red balance sheets, are being felt disproportionately across the state’s facilities.

Whereas urban-serving hospitals are often part of larger health systems that “can withstand these challenges a little bit more effectively,” Hawkins said, a growing number of Texas’ rural hospitals are having trouble keeping their heads above water. Per the new data, 26% of Texas’ rural hospitals are at risk of closure compared to 5% of urban hospitals.

“Texas had, unfortunately, really led the nation in the number of rural hospital closures before the pandemic,” Hawkins said. “I think because of the federal relief funding, much of that targeted for rural hospitals, thankfully we haven’t seen that continue during the pandemic. But we know as that federal funding runs out, we’ve really just created a fiscal cliff and these operating challenges going forward are going to continue to be real for rural hospitals.”

Meanwhile, Texas’ children’s hospitals that were already fielding a respiratory virus “tripledemic” and recent years’ pediatric behavioral health crisis are now picking up the slack from other facilities’ service closures, Hawkins said. Department of Health and Human Services data from this week show that more than 90% of the state’s pediatric beds are occupied.

“You’re really seeing the lack of capacity play out in a lot of our facilities—not just in Texas, but nationwide because of workforce shortages and some of these financial challenges going forward,” he said. 

Texas hospitals' cry for help comes just over a week after Mississippi's state health officer warned that more than half of his state's rural hospitals were at risk of closure. Additional nationwide data released this week by Kaufman Hall also suggest that the industry's meager profitability gains were wiped out in October. 

Texas hospitals push for pay cut delay, Medicaid expansion, workforce investments 

Hawkins said the trade group released the new financial numbers to draw a contrast between Texas’ hospital industry and a local economic boom.

“Those of you that are in Texas know that the economy’s kind of white-hot right now, post-pandemic,” Hawkins said while noting the “ripple effect” a hospital closure could have on a region’s employment numbers. “There’s lots of [economic] growth … because of the population growth, and so that really can kind of give folks a misperception about the health of the industry. So, we thought it would be good to get a third-party look at really what’s going on behind the scenes with our hospitals in this state.”

The warnings also come as the U.S. Congress enters its lame-duck period and the Texas legislature prepares for its next session in January.

At the federal level, Hawkins said his organization isn’t expecting a new round of COVID-19 relief funding to offset the $3.2 billion hospitals have lost to date due to the pandemic. Rather, the organization will be lobbying for Congress to delay January’s looming 4% Medicare payment cuts under the federal PAYGO law. A 2% cut that resumed on July 1 amounted to $162 million for Texas hospitals, the industry group said.

“I think our argument is, given this fiscal situation we've laid out, we need some more delay to hopefully stabilize the system some more,” Hawkins said. “Those Medicare cuts are all providers, so it’s a big deal particularly for physicians and then home health, nursing. All of those folks are dealing with a lot of these same structural issues going forward, so a 4% cut to them wouldn’t be helpful at this time either.”

Additionally, while the Texas Hospital Association generally supports the newly finalized Rural Emergency Hospital designation, Hawkins said his group is in line with the American Hospital Association in advocating “for some statutory tweaks to that program going forward to make it a little more attractive to some of these rural communities,” such as transitional funding.

Texas hospitals’ state-level lobbying, meanwhile, will focus on maintaining Medicaid rates for hospitals and supporting Medicaid expansion so that facilities can recoup some of the roughly $7 billion spent on uncompensated care annually, Hawkins said.

“We look at the payer mix of those [rural] facilities, you know it’s generally Medicare and Medicaid heavy,” “Texas is a challenge because we have a preponderance of small businesses, lots of service-level jobs, really that kind of working poor segment which would be targeted by the Medicaid expansion. … If you could get those folks coverage at a Medicaid rate, it would obviously help the financial situation of those hospitals.”

The trade group is also hoping to pick up more legislative support to tackle its nursing workforce shortages, Jennifer Banda, senior vice president of advocacy and public policy, added. Vacancy rates across the state’s hospitals are hovering around 18% to 20%, yet more than 15,700 qualified applicants were turned away from state nursing schools in 2021.

“If we can really invest some of our state resources into our nursing schools and allow them to grow, it doesn’t solve the problem tomorrow but we’ve got to look at this from a long-term solution and from the fact that Texas’ population is continuing to grow,” she said. "[It’s] not only good for the economy, but it’s good for healthcare, good for quality of care for the patient. That’s going to be something we’ll be talking a lot about this session.”