Report: Tremendous Financial Impact of the Pandemic on Alabama’s Hospitals
Feb. 2, 2023
For more information: Jeannie Gaines, (334) 651-3540
Hospital margins in Alabama have dropped 79 percent since the start of the pandemic, despite receiving financial assistance directly from the federal government and federal funds distributed through the state. Currently, 50 percent of Alabama’s hospitals are operating in the red. These jarring statistics came from a report released today by Kaufman Hall, a nationally known healthcare and higher education consulting firm, prepared at the request of the Alabama Hospital Association. Kaufman Hall prepared a similar national report for the American Hospital Association in the fall of 2022.
“Last year was the worst year financially for hospitals nationwide, but the situation in Alabama is much worse,” said Erik Swanson, senior vice president of data and analytics with Kaufman Hall and the lead on the national and the Alabama reports. “Since the beginning of the pandemic, Alabama’s hospitals have lost $1.5 billion dollars, money they couldn’t afford to lose. The report clearly shows that Alabama’s hospitals are in serious financial difficulty which creates a huge threat to the ability of Alabamians to have access to healthcare.”
“This study demonstrates that we are likely on a collision course with disaster, and we have only a short window to avoid losing access to services or seeing some hospitals close,” said Donald E. Williamson, MD, president of the Alabama Hospital Association. “While the access crisis will be worse in already underserved rural areas, as local hospitals close and patients pursue care in larger centers, many of the financially precarious urban facilities may not have the resources or capacity to absorb the volume. This report should be the canary in the coal mine for our state and national leaders to ensure the system avoids collapse.”
“A collapse of the system would have a ripple effect on the state’s economy as a whole,” said Joseph Marchant, CEO of Bibb Medical Center and chairman of the Alabama Hospital Association. “There is not one area of our state and local economic infrastructure that doesn’t depend on hospitals and other healthcare providers. In Bibb County, our hospital is one of the largest employers, and because of the hospital, our county has doctors, pharmacies, home health and other services. We also help attract new businesses, support existing ones and contribute substantially to the local tax base.”
Highlights from the Kaufman Hall report:
- Operating margins for Alabama hospitals have decreased 79 percent in 2022 compared to pre-pandemic (2019) levels despite receiving federal financial support. Without that assistance the operating margins would have declined by more than 100 percent.
- More than 50 percent of Alabama hospitals have negative operating margins, which has increased by 125% since 2019.
- In 2022 Alabama hospitals lost $738 million from operations compared to 2019. Since the beginning of the pandemic, hospital income declined by almost $ 1.5 billion. Without federal funds, the lost income would have been more than $2.4 billion.
- Seventy-five percent of the increased labor costs for Alabama hospitals were due to increases in pay and benefits for existing staff, including hazard pay, retention bonuses and other compensations. Approximately 25 percent of the increased labor costs were the result of significant increases charged by staffing agencies for contract labor during the pandemic.
- Costs have increased by $443 million for Alabama hospitals for medication and supplies over the period.
- Even though COVID has become less disruptive, hospital capacity remains a challenge due to greater patient acuity coupled with staffing shortages in both the acute and post-acute settings.
- The net effect of these challenges is a continued worsening of the financial condition of Alabama hospitals with losses of income growing from $124 million in 2020 to $738 million in 2022 even with federal relief funds.