Dive Brief:
- Hospitals’ finances were off to a shaky start early this year amid rising expenses and bad debt, according to a report released Thursday by consultancy Kaufman Hall.
- Bad debt, or expenses owed that are unlikely to be paid back, and charity care increased 8% year over year in January, according to the analysis. Meanwhile, patient volumes declined while expenses ticked up.
- Those debt and expense pressures aren’t likely to ease this year, Erik Swanson, managing director and data and analytics group leader at Kaufman Hall, said in a statement. “Overall structural costs are poised to go up,” he said. “Hospitals will need to be strategic about where to allocate resources and how to manage spending in what could be a challenging economic environment.”
Dive Insight:
Patient volumes were down for both inpatient and outpatient care in January, which contributed to lower revenues for hospitals. The decline was possible due to patients declining elective procedures around the holidays as well as a change in payer mix, according to the report.
Discharges declined 2% year over year that month, while average length of stay fell 3%. Emergency department visits also dropped 5% in January compared with the same month last year.
Rising expenses also continued to pressure hospitals’ finances. Total expenses per calendar day rose 5% year over year. Supply costs also rose 5%, while drug expenses increased 7%.
The sector also saw a “big increase” in labor costs in January, according to the report. Labor expenses — a significant challenge during the pandemic that stabilized in recent years as hospitals relied less on expensive contract workers — increased 5% year over year.
Meanwhile, hospitals are facing more financial challenges as the number of uninsured Americans increases, leading to more uncompensated care and lower revenue.
Last year, President Donald Trump signed a massive tax and policy law that includes significant cuts to Medicaid, likely culling millions of people from the safety-net insurance program.
Additionally, the expiration of more generous financial assistance for health plans on the Affordable Care Act exchanges pushed some enrollees to drop coverage. About 1 in 10 beneficiaries in marketplace plans in 2025 are currently uninsured, according to a survey published Thursday by health policy researcher KFF.
HCA Healthcare, one of the largest for-profit hospital operators in the country, said in January it expects to lose up to $900 million this year due to the lapse of the enhanced subsidies. Tenet Healthcare projects a $250 million hit due to the loss of the financial assistance.
