The Goldilocks nature of these jobs numbers is particularly apparent in the wage data.
By the numbers: Average hourly earnings rose by 0.3% in December, and are up 4.6% over the last year. Over the last three months, worker pay rose at a 4.1% annual rate.
Wages are rising, but unlike a year ago, the pace is consistent with the economy settling into the 2% inflation that the Fed seeks.
For example, there were stretches in 2018 and 2019 that featured wage growth similar to that in Q4 paired with low inflation levels — which meant rising real wages for workers.
In other words, current pay growth, if sustained, would help diminish the Fed’s fears of an upward spiral of wages and prices. Also, it sets workers up to see gains in their real compensation, if and when inflation comes down.
The intrigue: It appears that a surge in earnings initially reported in November was a head fake. The Labor Department revised those numbers to show a 0.4% rise in hourly earnings, not the 0.6% first reported.
The original figures had been a source of alarm among Fed watchers, suggesting the central bank might need to step up its monetary tightening campaign.
It is a good reminder — for both policymakers and those of us in the media — to not overreact to single-month shifts in any volatile data series.
We really liked what we saw in the December jobs report, which made us more optimistic about the possibility the 2023 economy will hold up reasonably well. More details below.
Situational awareness: In less optimistic news, the Institute for Supply Management’s survey of service industry activity plunged in December, to 49.6% — down from 56.5% in November. This is the first time the index has been in negative territory since May 2020.
The U.S. labor market is extraordinarily strong, despite gloom-and-doom economic forecasts and high-profile layoffs.
That is the takeaway from December numbers, out this morning, that were outstanding in subtle and not-so-subtle ways.
Why it matters: If America’s economy is going to come in for a soft-landing — inflation dissipating without mass unemployment — you would expect to see numbers that look a lot like last month’s.
The economy continues to add a healthy number of new jobs, though the pace is moderating. Wages are rising, but not so quickly as to alarm economic policymakers. And more workers are entering the labor force, which — if sustained — could heal labor shortages.
The data has positive developments both for American workers — who continue to have abundant job opportunities — and for Fed officials seeking evidence that their inflation-fighting efforts are starting to cool job creation and wage growth to more sustainable rates.
The headline unemployment rate, at 3.5%, matched its lowest levels in decades. If you extend the calculation out a couple more decimal places, University of Michigan economist Justin Wolfers points out, it was 3.468%, the lowest since 1969!
It fell even as the labor force expanded by 439,000 workers, a welcome development on the supply front after months of little progress. More Americans working means fewer of the labor shortages that have contributed to inflation.
An additional 717,000 Americans reported being employed, helping resolve what had been a puzzling disconnect between different sources of labor market data — and in a positive direction.
A stunningly low jobless rate might raise some alarm bells at the Fed over the possibility the job market is too tight, and that this could fuel inflation. But the labor force growth and benign wage data (more on that below) may take the edge off those fears.
By the numbers: Employers are still hiring at a rapid pace — 223,000 in December — but slowing from early last year’s unsustainable numbers.
The economy has added roughly 247,000 jobs per month on average in the last three months, slower than the 366,000 in the prior three-month stretch, and less than half of the 539,000 jobs added each month in Q1 2022.
Evidence of tech layoffs did show up somewhat in the report, with the information sector shedding 5,000 jobs. Temporary help services employment fell by 35,000, the clearest sign employers are paring back demand for workers.
But most other sectors, including leisure and hospitality, construction and health care, continued to add jobs.
The bottom line: If we keep getting numbers like these, 2023 may not be such a rough year for workers after all.
Financial analysts have said that 2022 may have been the worst year for hospital finances in decades. This year looks like it will be yet another year of financial underperformance, with rural providers in especially dire circumstances.
What’s driving this bleak financial reality? It’s “primarily an expense story,” said Erik Swanson, a senior vice president at Kaufman Hall‘s data analytics practice.
“Growth in expenses has vastly outpaced growth in revenues — since pre-pandemic levels since last year, and even the year prior — such that margins are ultimately being pushed downward. And hospitals’ median operating margin is still below zero on a cumulative basis,” he declared, referring to 2021 and 2020.
Here’s some context about how dismal this situation is: Even in 2020, a year in which hospitals saw extraordinary losses during the first few months of the pandemic, they still reported operating margins of 2%.
What’s even more disconcerting is that hospitals are underperforming financially pretty much across the board, Swanson said.
Even Kaiser Permanente, one of the country’s largest health systems with an integrated delivery model, reported a $1.5 billion loss for the third quarter of 2022.
Rural hospitals are in even worse shape, but more on that below.
Other hospitals have been forced to shutter service lines to offset these financial losses. Some are also turning to integration and consolidation.
For example, Hermann Area District Hospital in Missouri said last month that it is seeking a “deeper affiliation” with Mercy Health or another provider. This announcement came after the hospital eliminated its home health agency as a cost-cutting measure. In December, the hospital projected a loss of $2 million for 2022.
We can also look at the mega-merger between Atrium Health and Advocate Aurora Health, which was completed last month. The deal, which is designed for cost synergy, creates the fifth-largest nonprofit integrated health system in the U.S.
The merger was finalized one day after North Carolina Attorney General Josh Stein expressed concern about how the deal could impact rural communities. He said that while he didn’t have a legal basis within his office’s limited statutory authority to block the deal, he was worried that it could further restrict access to healthcare in rural and underserved communities.
Stein brings up an extremely valid concern. Rural hospitals’ dismal financial circumstances are becoming more and more worrisome — in fact, about 30% of all rural hospitals are at risk of closing in the near future, according to a recent report from the Center for Healthcare Quality and Payment Reform (CHQPR).
A crucial reason for this is that it is more expensive to deliver healthcare in rural areas — usually because of smaller patient volumes and higher costs for attracting staff. Another factor is that payments rural hospitals receive from commercial health plans isn’t enough to cover the cost of delivering care to patients in rural areas, said Harold Miller, CEO of CHQPR.
“Many people assume that private commercial insurance plans pay more than Medicare and Medicaid. But for small rural hospitals, the exact opposite is true,” he said. “In many cases, Medicare is their best payer. And private health plans actually pay them well below their costs — well below what they pay their larger hospitals. One of the biggest drivers of rural hospital losses is the payments they receive from private health plans.”
In Miller’s view, rural hospitals perform two main functions: taking care of sick people in the hospital and being there for people in case they need to go to the hospital.
To fulfill the latter job, rural hospitals must operate 24/7 emergency rooms. These hospitals get paid when there’s an emergency, but not when there isn’t — even though the hospital is incurring costs by operating and staffing these units.
“Rural hospitals have a physician on duty 24/7 to be available for emergencies. But they don’t get paid for that by most payers. Medicare does pay them for that, but other payers don’t. If the hospital is doing two different things, we should be paying them for both of those things. Hospitals should be paid for what I refer to as ‘standby capacity,’” Miller said.
He bolstered his argument by pointing to these analogies: Do we only pay firefighters when there’s a fire? Do we only pay police officers when there’s a crime?
It’s also important to remember that rural hospitals are in the midst of transitioning to a post-pandemic environment, now without the pandemic-era financial assistance they received from the government, said Brock Slabach, chief operations officer at the National Rural Health Association.
“Rural providers are looking to move into the future without the benefit of those extra payments. And they’re in an environment of really high inflation. It’s over 8%, and for some goods and services in the healthcare sector, that’s going to be over 20% in terms of increased prices. Wages and salaries have also gone up significantly. But patient volumes have maintained below average or average. That all presents a huge challenge,” Slabach said.
Rural providers across the country are dealing with the stressors Slabach described and clamoring for more government help. For example, the Michigan Health & Hospital Association sought more money from the state last month after having to take 1,700 beds offline.
Many rural hospitals can’t escape their fate. From 2010 to 2021, there were 136 rural hospital closures. There were only two closures in 2021, and Slabach said 2022 produced a similarly low number. But these low totals are due to government relief, he explained. Slabach said he’s expecting an increase in rural hospital closures in 2023.
When a rural hospital closes, it means community members have to travel far distances for emergency or inpatient care. Miller pointed out another problem: in many rural communities, the hospital is the only place people can go to get laboratory or imaging work done. The hospital might also be the only source of primary care for the community. Shuttering these hospitals would be a massive blow to rural Americans’ healthcare access.
In the face of these potentially devastating blows to patient access, financial analysts’ outlook is bleak.
Higher inflation and costly labor expenses will continue to have negative effects on hospitals — both rural and urban — in 2023, according to an analysis from Moody’s. Expenses will also continue to increase due to supply chain bottlenecks, the need for more robust cybersecurity investments and longer hospital stays due to higher levels of patient acuity.
All of this doom and gloom begs the question — are any hospitals doing well financially?
The answer is yes, a select few. Let’s look at the three largest for-profit health systems in the nation — Community Health Systems, HCA Healthcare and Tenet Healthcare. As of 2020, these three public health systems accounted for about 8% of hospital beds in the U.S.
These three systems all had positive operating margins for the majority of the pandemic, including most recently in the third quarter of 2022.
Large public health systems have shareholders to report to and stock prices to worry about. Does this mean they’re more likely to deny care to patients who can’t afford it while other hospitals pick up the slack?
Slabach said it’s tough to say.
“Obviously, hospitals try to mitigate their exposure to risk when it comes to taking care of patients. Most hospitals do a really good job of providing services and care to people who don’t have insurance or don’t have the means to pay. But that gets stressed in this current financial environment. So indeed, there may be instances where what you suggested might happen, but it’s not because they want to deny services or deny care. It’s because they have a bigger picture they have to maintain,” Slabach said.
And the big picture involving dollar signs for hospitals looks pretty bleak in 2023.
Sustained high labor expenses and inflationary pressures will continue to affect the healthcare industry in 2023, keeping the outlook for nonprofit hospital systems negative, Moody’s said in a Dec. 7 report.
In addition to such pressures, persistent COVID-19 surges, supply chain disruptions and the need for continued cybersecurity investments will also increase expenses, the report said. And while operating revenue is expected to modestly improve next year, the ending of federal Coronavirus Aid, Relief and Economic Security Act funding, net Medicare cuts and the end of the public health emergency will negatively affect hospital revenues, Moody’s said.
“This level of operating cash flow production will likely prove insufficient over the long term to enable adequate reinvestment in facilities, maintain investment in programs, or support organizational growth — key considerations that drive our negative outlook,” said Brad Spielman, vice president, senior credit officer for Moody’s.
Some of the less well-funded healthcare systems could even face breaches of covenant amid such a challenging backdrop, Moody’s warned. Such covenants typically refer to issues like days of cash on hand or minimum coverage of debt.
Management in such challenged systems have taken measures to mitigate the danger of such breaches, the report said. These include liquidating investments and drawing on lines of credit as well as refinancing debt, an unfavorable option in the current economic situation.
“The present interest-rate environment, however, currently makes such a move relatively costly,” the report noted.
The Moody’s report follows quickly on the heels of a similar one from Fitch Ratings Dec. 1 that highlighted the “formidable challenge” of high labor expenses and inflationary pressures facing the industry.
UnitedHealth Group expects Optum to see a long-term double-digit revenue growth rate and bring in a range between $212 billion to $214 billion in 2023 revenues.
The Minnetonka, Minn.-based healthcare giant shared Nov. 29 it projects growth margins of over 20 percent for technology products and low- to mid-single-digit growth for pharmacy care services.
2023 projections:
Optum Health Revenues: $91 billion to $92 billion Earnings: $7.4 billion to $7.6 billion
Optum Insight Revenues: $18.6 billion to $19.3 billion Earnings: $4.4 billion to $4.5 billion
OptumRx Revenues: $105.5 billion to $106.5 billion Earnings: $4.8 billion to $4.9 billion
UnitedHealth Group expects 2023 revenues of $357 billion to $360 billion, net earnings of $23.15 to $23.65 per share, and adjusted net earnings of $24.40 to $24.90 per share. Cash flows from operations are expected to be $27 billion to $28 billion.
UnitedHealthcareexpects 2023 revenues to range from $274 billion to $276 billion. By the end of this year, the payer’s revenues are expected to hit $249.2 billion, up from $222.9 billion in 2021.
Wall Street’s roil has stabilized somewhat in recent days, with the S&P 500 brushing up against its 200-day moving average and rising more than 10 percent since its October lows, as of publication time.
The index’s 50-day moving average is trending up, according to financial data firm Refinitiv. But it still must climb another 7.4 percent to form a “golden cross,” which is when a stock or index’s short-term moving average rises above one of its longer-term moving averages. The S&P 500’s 20-day and 100-day moving averages are closer to the milestone, only needing increases of 5 percent and 1.2 percent, respectively.
The Dow Jones Industrial Average has already formed a small golden cross: its 20-day moving average is 1.2 percent higher than its 200-day moving average.
Investors Optimistic about Healthcare Sector
– Investors are most optimistic about the Healthcare sector, which is trading close to its 3-year average “price to earnings-per-share” ratio of 48.1x, according to Simply Wall Street.
– Analysts are expecting an annual earnings growth of 13.4 percent, higher than the sector’s past year earnings growth of 5 percent.
– Merck and Johnson & Johnson were among last week’s top gainers driving the market.
Inflation Appears to be Slowing
– The recent lower-than-expected inflation figures could indicate it is slowing.
– The Fed may continue raising rates, considering the strength in recent labor market and retail sales data.
The labor market remained solid in October: the U.S. economy added 261,000 jobs, while the unemployment rate rose to 3.7% from 3.5%, the government said on Friday.
Why it matters: The last major economic report before the midterm elections shows that while jobs growth has slowed, employers continue to add workers at a robust pace as the labor market defies fears of a recession.
Driving the news: October’s jobs gains were above the 205,000 payrolls economists expected. It’s a slightly slower pace than the 315,000 jobs added in September, which was revised higher by 52,000.
Average hourly earnings, a proxy for wage growth, rose by 0.4% in October — a bit faster than the prior month, when wages grew 0.3%.
The share of people working or looking for work, known as the labor force participation rate, was 62.2%, a tick below the 62.3% in September.
The backdrop: The Federal Reserve this year has raised interest rates at historically rapid pace in an effort to slow the economy and, in turn, beat back soaring inflation. Many economists warn that the U.S. will soon enter a recession. Still, the labor market has chugged along.
Layoffs are being reported in a handful of sectors, including technology. But a range of job market indicators have suggested that, generally, employers are hungry for workers and trying to hold on to staff.
That is worrisome for the Fed, which fears the too-hot labor market will stoke inflation. But, on the flip side, it’s been great for American workers — though the booming job market has been coupled with decades-high inflation that’s eaten away at wage gains.
The economy is a top issue for voters in next week’s midterm elections.
There are an estimated 19,000 full-time job vacancies across Massachusetts acute care hospitals, according to a survey published Oct. 31 by the Massachusetts Health & Hospital Association.
Hospitals are working to address backlogs and transfer patients to post-acute care settings while skyrocketing labor costs — including a projected $1 billion in travel labor costs this year — are compounding healthcare facilities’ financial woes, according to the report. These challenges are hampering hospital operations as well as leading to care delays and reduced access to care.
Fewer workers mean that fewer beds are available for patients, while the demand for care increases due to deferred care throughout the COVID-19 pandemic, the behavioral health crisis and reduced access to community-based services continue to challenge hospitals throughout the state. At any given time, more than 1,500 patients are in acute hospital beds awaiting placement to a specialized behavioral health bed or post-acute care, according to the MHA.
“Our healthcare system has never been more fragile, and its leaders have never been more concerned about what’s to come in months ahead,” Steve Walsh, president and CEO of the MHA, said in an Oct. 31 news release shared with Becker’s Hospital Review. “They are exhausting every option within their control to confront these challenges, but this is an unsustainable reality and providers are in dire need of support.”
In response to the survey, 37 hospitals — representing 70 percent of the state’s total hospital employment — reported 6,650 vacancies among 47 positions critical to hospital operations and clinical care. The positions range from direct care nurses to lab personnel and clinical support staff. Eighteen of the 47 positions have a vacancy rate greater than 20 percent.
At a 56 percent vacancy rate, licensed practical nurses is the most in-demand position, while home health aides (34 percent), mental health workers (32 percent), infection control nurses (26 percent) and CRNAs (24 percent) are also highly sought after.
Survey respondents identified 6,650 vacancies. The 47 positions included in the survey, which was conducted this summer, account for less than half of all hospital roles. The MHA said it extrapolated that across all positions and hospitals to arrive at an estimated 19,000 vacancies across the state.
Staffing shortages are driving labor costs to an unsustainable level for many hospitals already grappling with margins close to zero or in the red. Hospitals have relied on high-cost temporary staffing to fill critical positions during the pandemic, resulting in average hourly wage rates for travel nurses increasing 90 percent since 2019, according to the report. Massachusetts hospitals reported spending $445 million on temporary registered nurse staffing halfway through the fiscal year, with temporary RN staffing costs increasing 234 percent from fiscal year 2019 to March 2022.
If urgent steps are not taken to address healthcare’s staffing shortage, hospitals will continue to face capacity challenges and overpay for labor, which will lead to fiscal instability, according to Mr. Walsh.
The MHA urged providers, payers, public officials and government agencies to address the workforce crisis by investing in training and education, expanding the workforce pipeline, providing financial support to hospitals and advancing new models of care such as telehealth and at-home care.
Hospitals in the United States are on track for their worst financial year in decades. According to a recent report, median hospital operating margins were cumulatively negative through the first eight months of 2022. For context, in 2020, despite unprecedented losses during the initial months of COVID-19, hospitals still reported median eight-month operating margins of 2 percent—although these were in large part buoyed by federal aid from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The recent, historically poor financial performance is the result of significant pressures on multiple fronts. Labor shortages and supply-chain disruptions have fueled a dramatic rise in expenses, which, due to the annually fixed nature of payment rates, hospitals have thus far been unable to pass through to payers. At the same time, diminished patient volumes—especially in more profitable service lines—have constrained revenues, and declining markets have generated substantial investment losses.
While it’s tempting to view these challenges as transient shocks, a rapid recovery seems unlikely for a number of reasons. Thus, hospitals will be forced to take aggressive cost-cutting measures to stabilize balance sheets. For some, this will include department or service line closures; for others, closing altogether. As these scenarios unfold, ultimately, the costs will be borne by patients, in one form or another.
Hospitals Face A Difficult Road To Financial Recovery
There are several factors that suggest hospital margins will face continued headwinds in the coming years. First, the primary driver of rising hospital expenses is a shortage of labor—in particular, nursing labor—which will likely worsen in the future. Since the start of the pandemic, hospitals have lost a total of 105,000 employees, and nursing vacancieshave more than doubled. In response, hospitals have relied on expensive contract nurses and extended overtime hours, resulting in surging wage costs. While this issue was exacerbated by the pandemic, the national nursing shortage is a decades-old problem that—with a substantial portion of the labor force approaching retirement and an insufficient supply of new nurses to replace them—is projected to reach 450,000 by 2025.
Second, while payment rates will eventually adjust to rising costs, this is likely to occur slowly and unevenly. Medicare rates, which are adjusted annually based on an inflation projection, are already set to undershoot hospital costs. Given that Medicare doesn’t issue retrospective corrections, this underadjustment will become baked into Medicare prices for the foreseeable future, widening the gap between costs and payments.
This leaves commercial payers to make up the difference. Commercial rates are typically negotiated in three- to five-year contract cycles, so hospitals on the early side of a new contract may be forced to wait until renegotiation for more substantial pricing adjustments. “Negotiation” is also the operative term here, as payers are under no obligation to offset rising costs. Instead, it is likely that the speed and degree of price adjustments will be dictated by provider market share, leaving smaller hospitals at a further disadvantage. This trend was exemplified during the 2008 financial crisis, in which only the most prestigious hospitals were able to significantly adjust pricing in response to historic investment losses.
Finally, economic uncertainty and the threat of recession will create continued disruptions in patient volumes, particularly with elective procedures. Although health care has historically been referred to as “recession-proof,” the growing prevalence of high-deductible health plans (HDHPs) and more aggressive cost-sharing mechanisms have left patients more exposed to health care costs and more likely to weigh these costs against other household expenditures when budgets get tight. While this consumerist response is not new—research on previous recessions has identified direct correlations between economic strength and surgical volumes—the degree of cost exposure for patients is historically high. Since 2008, enrollment in HDHPs has increased nearly four-fold, now representing 28 percent of all employer-sponsored enrollments. There’s evidence that this exposure is already impacting patient decisions. Recently, one in five adults reported delaying or forgoing treatment in response to general inflation.
Taken together, these factors suggest that the current financial pressures are unlikely to resolve in the short term. As losses mount and cash reserves dwindle, hospitals will ultimately need to cut costs to stem the bleeding—which presents both challenges and opportunities.
Direct And Indirect Consequences For Cost, Quality, And Access To Care
Inevitably, as rising costs become baked into commercial pricing, patients will face dramatic premium hikes. As discussed above, this process is likely to occur slowly over the next few years. In the meantime, the current challenges and the manner in which hospitals respond will have lasting implications on quality and access to care, particularly among the most vulnerable populations.
Likely Effects On Patient Experience And Quality Of Care
Insufficient staffing has already created substantial bottlenecks in outpatient and acute-care facilities, resulting in increased wait times, delayed procedures, and, in extreme cases, hospitals diverting patients altogether. During the Omicron surge, 52 of 62 hospitals in Los Angeles, California, were reportedly diverting patients due to insufficient beds and staffing.
The challenges with nursing labor will have direct consequences for clinical quality. Persistent nursing shortages will force hospitals to increase patient loads and expand overtime hours, measures that have been repeatedly linked to longer hospital stays, more clinical errors, and worse patient outcomes. Additionally, the wave of experienced nurses exiting the workforce will accelerate an already growing divide between average nursing experience and the complexity of care they are asked to provide. This trend, referred to as the “Experience-Complexity Gap,” will only worsen in the coming years as a significant portion of the nursing workforce reaches retirement age. In addition to the clinical quality implications, the exodus of experienced nurses—many of whom serve in crucial nurse educator and mentorship roles—also has feedback effects on the training and supply of new nurses.
Staffing impacts on quality of care are not limited to clinical staff. During the initial months of the pandemic, hospitals laid off or furloughed hundreds of thousands of nonclinical staff, a common target for short-term payroll reductions. While these staff do not directly impact patient care (or billed charges), they can have a significant impact on patient experience and satisfaction. Additionally, downsizing support staff can negatively impact physician productivity and time spent with patients, which can have downstream effects on cost and quality of care.
Disproportionate Impacts On Underserved Communities
Reduced access to care will be felt most acutely in rural regions. A recent report found that more than 30 percent of rural hospitals were at risk of closure within the next six years, placing the affected communities—statistically older, sicker, and poorer than average—at higher risk for adverse health outcomes. When rural hospitals close, local residents are forced to travel more than 20 miles further to access inpatient or emergency care. For patients with life-threatening conditions, this increased travel has been linked to a 5–10 percent increase in risk of mortality.
Rural closures also have downstream effects that further deteriorate patient use and access to care. Rural hospitals often employ the majority of local physicians, many of whom leave the community when these facilities close. Access to complex specialty care and diagnostic testing is also diminished, as many of these services are provided by vendors or provider groups within hospital facilities. Thus, when rural hospitals close, the surrounding communities lose access to the entire care continuum. As a result, individuals within these communities are more likely to forgo treatment, testing, or routine preventive services, further exacerbating existing health disparities.
In areas not affected by hospital closures, access will be more selectively impacted. After the 2008 financial crisis, the most common cost-shifting response from hospitals was to reduce unprofitable service offerings. Historically, these measures have disproportionately impacted minority and low-income patients, as they tend to include services with high Medicaid populations (for example, psychiatric and addiction care) and crucial services such as obstetrics and trauma care, which are already underprovided in these communities. Since 2020, dozens of hospitals, both urban and rural, have closed or suspended maternity care. Similar to closure of rural hospitals, these closures have downstream effects on local access to physicians or other health services.
Potential For Productive Cost Reduction And The Need For A Measured Policy Response
Despite the doom-and-gloom scenario presented above, the focus on hospital costs is not entirely negative. Cost-cutting measures will inevitably yield efficiencies in a notoriously inefficient industry. Additionally, not all facility closures negatively impact care. While rural facility closures can have dire consequences in health emergencies, studies have found that outcomes for non-urgent conditions remained similar or actually improved.
Historically, attempts to rein in health care spending have focused on the demand side (that is, use) or on negotiated prices. These measures ignore the impact of hospital costs, which have historically outpaced inflation and contributed directly to rising prices. Thus, the current situation presents a brief window of opportunity in which hospital incentives are aligned with the broader policy goals of lowering costs. Capitalizing on this opportunity will require a careful balancing act from policy makers.
In response to the current challenges, the American Hospital Association has already appealed to Congress to extend federal aid programs created in the CARES Act. While this would help to mitigate losses in the short term, it would also undermine any positive gains in cost efficiency. Instead of a broad-spectrum bailout, policy makers should consider a more targeted approach that supports crucial community and rural services without continuing to fund broader health system inefficiencies.
The establishment of Rural Emergency Hospitals beginning in 2023 represents one such approach to eliminating excess costs while preventing negative patient consequences. This rule provides financial incentives for struggling critical access and rural hospitals to convert to standalone emergency departments instead of outright closing. If effective, this policy would ensure that affected communities maintain crucial access to emergency care while reducing overall costs attributed to low-volume, financially unviable services.
Policies can also help promote efficiencies by improving coverage for digital and telehealth services—long touted as potential solutions to rural health care deserts—or easing regulations to encourage more effective use of mid-level providers.
Conclusion
The financial challenges facing hospitals are substantial and likely to persist in the coming years. As a result, health systems will be forced to take drastic measures to reduce costs and stabilize profit margins. The existing challenges and the manner in which hospitals respond will have long-term implications for cost, quality, and access to care, especially within historically underserved communities. As with any crisis, though, they also present an opportunity to address industrywide inefficiencies. By relying on targeted, evidence-based policies, policy makers can mitigate the negative consequences and allow for a more efficient and effective system to emerge.
HENRY KOTULA 