Hospitals around the country are struggling to survive. Some have filed for bankruptcy, and others have divested or closed certain areas of their healthcare services to streamline operations and reduce costs. CostFlex’s suite of hospital decision-support tools meets objectives and turns the corner toward profitable operations.
CostFlex offers a wide range of hospital decision support software, including Activity Based Cost Accounting and Payer Contract Analyzer. These tools enable hospitals to analyze large volumes of data quickly and accurately, pinpointing areas for improvement and managing resources. Fast, effective decision-making helps these organizations stay afloat—and even thrive—while continuing to provide excellent service.
Disturbing Trends for Hospitals
In the last 40 years, around 1,000 hospitals have closed in the U.S. The American Hospital Association (AHA) reports that 136 rural hospitals closed between 2010 and 2021, with 19 of these closing in 2020 alone.
Historically, hospitals have had to contend with longstanding pressures that include:
- Staffing shortages
- Medicaid and insurance reimbursement issues
- Low patient volume
- Regulatory barriers
The COVID-19 pandemic created even more barriers and pressures on hospitals. The effects continue as hospitals try to return to normal operations. Expenses for drugs, supplies, labor, and equipment have increased substantially.
Small and rural hospitals, in particular, have borne the most significant impact, and many lack the resources to absorb the economic effects of the pandemic and inflation. Rural hospitals account for around 35% of all healthcare facilities nationwide. These include critical access hospitals (CAH), frontier hospitals, and sole community hospitals.
Hospitals Are Important for Communities
When hospitals close or cut back, they have far-reaching impacts on the local economy and communities. Hospitals not only provide medical care and services but also create jobs. Along with doctors and nurses, hospitals employ custodial personnel, administrative staff, and others. These workers return the money they earn from the hospital to the community again when they purchase local goods and services and pay local taxes.
In some locations, hospitals are the largest employers and the only source of medical care and emergency treatment. The AHA reports that rural hospitals support 1 in every 12 rural jobs in America. In 2020, rural hospitals contributed more than $220 billion in economic activities to their communities.
Closures, Bankruptcies, Divestitures
According to Becker’s Hospital CFO Report, 2022 was a devastating year for at least 19 hospitals. Several closed completely, often after decades of service, while others shut down emergency and inpatient services or consolidated areas into centralized locations.
Other hospitals filed for bankruptcy, citing hundreds of millions of dollars in revenue loss and hundreds of millions more spent on capital improvements to keep facilities running. Fierce Healthcare projects billions of dollars in losses and negative operating margins across the industry, with up to 68% of all hospitals nationwide operating in the red by the end of 2022. Hospitals could see a decline in the profit margins they reported in 2019 by 37% to 133%.
Overall, the reports point to low inpatient demand and volume, a shortage of emergency room personnel, increased labor costs, and higher inflation-related expenses as reasons hospitals are struggling. The COVID-19 pandemic was also a major culprit.
Help for Hospitals
Although Congress extended its Medicare-Dependent Hospital (MDH) and Low-Volume Adjustment (LVA) programs, hospitals may continue to struggle if they cannot accurately analyze their cost-to-profit ratios and make informed decisions about the most efficient allocation of resources.