One in five hospitals in California is at risk of closure due to financial difficulties, according to a new report from Kaufman Hall, a healthcare management consulting firm.
In part due to the COVID-19 pandemic causing increased labor and supply costs, which have frayed the bottom lines of health systems across the country, hospitals have started to show signs of financial stress, with some being forced to lay off employees or cut administrative jobs.
Glenn Melnick, a UC Los Angeles economist, explains what health care providers are dealing with.
“Health care providers pretty much everywhere are dealing with increased costs at the same time as their investment income is shrinking and they are losing that extra revenue that they got during the COVID pandemic,” Melnick said. “And then you’ve also got to consider what’s happening with supply costs, which have also increased a lot due to inflation.”
The situation is being called the worst since the pandemic started, with one study finding that 1 in 5 hospitals is at risk of closure due to budget difficulties. In California, 52% of the state's roughly 400 hospitals are losing money every day to care for patients, and it cost $23.4 billion more in 2022 to provide hospital care than pre-pandemic levels.
The report reveals that California hospitals lost $8.5 billion in 2022, on top of the $12 billion in losses sustained during the pandemic, even after federal relief. This crisis could lead to longer emergency department wait times, care deserts, and farther distances to travel for care, with disadvantaged communities being hit the hardest.
The California Hospital Association is urging the state to take immediate action by providing aid for hospitals on the brink of closure and enhancing Medi-Cal rates, which have not increased in more than a decade, so that California pays more than 74 cents for every dollar it costs to provide care to Medi-Cal enrollees. Failure to act quickly and meaningfully could leave Californians without access to health care services when they need them the most.