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September 6, 2022

Why so many hospitals are cutting back on services

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    Many hospitals throughout the country are cutting back on services due to staff shortages, leading them to become "much more deliberate and nuanced about providing the right level of care in the right location," Ginger Christ reports for Modern Healthcare's "Transformation Hub."

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    A difficult financial year for hospitals

    According to research from the health care consultancy Kaufman Hall, 2022 has been the worst financial year for hospitals since the pandemic, with national operating margins at -0.98% in July, marking the seventh negative month in a row. In addition, the median change in operating margins compared to last year was -63.9%, Kaufman Hall found.

    These losses have come from a combination of decreasing patient demand, the cost of hiring travel workers, and the end of pandemic relief funding from the federal government, said Erik Swanson, SVP of data and analytics at Kaufman Hall. "Hospitals are sort of facing it alone at this point and, ultimately, they're in a tough position."

    Contract labor as a percentage of total workforce expenses increased from 2% in 2019 to 10% in 2022. And in addition to increased reliance on these workers, the cost of hiring travel workers also surged. In 2019, the wage for contract nurses was $64 an hour, but that number rose to $150 an hour by 2022, according to Kaufman Hall.

    Hospitals scale back services

    As a result of these financial losses, many hospitals have had to make the difficult decision to either cut back or entirely eliminate some services, Christ reports.

    According to Therese Fitzpatrick, an SVP at Kaufman Hall, hospitals are "becoming much more deliberate and nuanced about providing the right level of care in the right location."

    During the pandemic, Memorial Hospital of Carbon County in Wyoming lost five labor and delivery nurses to travel jobs, which was a significant loss for a department of 12 people. In response, the hospital started hiring travel workers so the maternity department was able to continue operating.

    "It's not something that could be budgeted for in advance. It really caught us. We saw a dramatic impact on our finances," said Stephanie Hinkle, communications director for the hospital.

    Four months later, the hospital's board of trustees decided to halt labor and delivery services at the hospital. "From January to April, we saw such a dramatic change in cash position," Hinkle said. "For the good of the entire organization, and for us to continue to exist as an organization, something had to take place."

    Similarly, Ellis Medicine in New York announced in May it would halt admissions to its adolescent inpatient mental health unit because of staff shortages.

    "It's been frustrating," Paul Milton, Ellis Medicine's president and CEO, wrote in an open letter in May. "The challenging situation we are in—as a health care provider and together as a community—is related to the national health care staffing crisis. This crisis wasn't caused by Covid, but the ripple effects of the pandemic certainly complicate it."

    University Hospitals in Cleveland also stopped offering inpatient, emergency, radiology, and some ambulatory services at its Bedford and Richmond Heights locations in July because of staff shortages. "We have to have a couple of things that stay top of mind always," said Michelle Hereford, University Hospitals' chief nursing executive. "That includes quality and safety. What comes along with that is some very difficult and hard decisions."

    As a result of so many hospitals cutting back on services, the health care safety organization ECRI in a report published in March identified worker shortfalls as the top patient safety concern for 2022. "We know when there are staff shortages, it impacts patients throughout their entire care process," said Shannon Davila, associate director of ECRI's safety solutions program. "Certainly there is a risk to the patient if health care organizations are forced to cut services."

    Health systems must weigh the risks and benefits of cutting back or eliminating services. Understaffing could be a threat to patient safety, but so could a lack of access to services, Davila said. "It can't just be a quick decision," she said. "They have to think about the risk to the staff, the finances of the organization, and the risk to the patient." (Christ, "Transformation Hub," Modern Healthcare, 9/2)

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