Operating margins plunged by more than $190 million for the first six months of 2023 in latest analysis of hospital and health system financial data, with average losses nearly doubling from 2022.
A new Minnesota Hospital Association (MHA) analysis of hospital and health system finances shows losses growing at many of the state’s major health care providers. Data collected from MHA members show ongoing financial losses nearly tripled in some cases. Key findings include:
- Median hospital and health system operating margins declined from -.5% in 2022 to -2.7% in the first half of 2023.
- 67% of hospitals and health systems in the MHA analysis had negative operating margins, which means they were losing money. This is up from 55% of hospitals and health systems that had negative margins in 2022.
- The costs of labor grew by 7%, and supply and service costs grew by 6%.
- Nearly a quarter of member 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.
The losses also correspond to a rise from 62 percent to 64 percent in the proportion of Medicare and Medicaid patients reported by nearly every hospital. Those programs continue to reimburse providers well below the actual cost of providing care, routinely 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 health care are adding to the grave financial challenges hospitals and health systems are facing,” says MHA President and CEO Rahul Koranne.
Similar pressures have closed programs and cut care at more than 50 hospitals across the country already in 2023 and hundreds more could follow. Nearly 30% of U.S. rural hospitals are facing closure, according to the Center for Healthcare Quality and Payment Reform, and that could include as many as a half dozen in Minnesota if urgent action is not taken.
About the Data: The non-public financial data referenced here is provided voluntarily by hospitals and health systems in Minnesota. It is not audited financial data but is more current than public financial reports issued by the hospitals and health systems. 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.
Please contact the Minnesota Hospital Association if you’d like more information.