Health system CFOs told Becker's that increasing costs followed by reimbursement rates that aren't budging remains a massive source of financial pressure on hospitals.
Despite some signs that labor cost inflation is easing, CFOs said that "we're not out of the woods yet." Additionally, some hospitals are finding it challenging to meet seismic requirements and provide behavioral healthcare.
Here is what three CFOs told Becker's about the financial challenges facing their systems:
Anthony Saul. CFO of Grady Health System (Atlanta): We have additional risk, given that not only did Medicaid not expand in Georgia, we still have north of 25% uninsured population. At Grady, 30% of our patient population is uninsured. The added stress of Medicaid redetermination is definitely a looming financial challenge. There are additional financial pressures that we're seeing on the horizon. While the labor shortage has improved, we think we're on another side of that cycle. We're not out of the woods yet, especially given the national dynamics with large health systems like Kaiser and some others in the Midwest potentially facing strikes. That then reduces the pool and starts another cycle where we see our nurses leaving for short-term lucrative deals.
Additionally, this time around, the physician shortage and increasing costs, retaining and or attracting new providers, we think is going to be a larger factor in the near term. As the providers themselves face the same life question: am I earning enough at my current institution? Many physicians did not see the increases that other clinical staff saw during the pandemic and so we think that's on the horizon. That is another contributing factor that's going to increase the cost of providing care.
Brett Tande. CFO of Scripps Health (San Diego): The continued mismatch in inflationary pressures on the expense side and the rigidity of health care reimbursement on the revenue side. Typical Medicare hospital increases are roughly 3% per year, and this year, the Medicare physician fee schedule is actually declining about 3%. Commercial insurers continue to push against any increases in reimbursement. On our expense side, with labor and supplies eating up 70% to 80% of total expenses, it is not surprising to learn that our expenses are rising at 5 percent to 7% per year. That mismatch is not sustainable, and our management efforts are intended to close up that gap.
The unfunded mandates present a unique challenge as well. Having hospitals that are fully functional post-earthquake and being able to have a minimum wage of $25 in healthcare are both laudable goals that we fully support. Nevertheless, they are very costly when mandated and unfunded. The 2030 seismic regulations will require more than $3 billion in capital expenditures for Scripps, and the minimum wage bill will increase expenses at Scripps by more than $100 million annually. We will find ways to meet both, and we support the intention of both, but to think that achieving both goals won't ultimately have an impact on the cost of healthcare for Californians is shortsighted. These mandates will add to the inflationary pressures in health care, which is something our society will have to confront in the coming years.
Cecelia Moore. CFO of Vanderbilt Medical Center (Nashville, Tenn.): We have a psychiatric hospital and the rates in behavioral health are just not even covering our costs. That is a really large challenge for the country as a whole. You can"t have access to behavioral healthcare if you can't even break even on that line of business. With our governmental payers, particularly Medicare, Medicare has got a proposal on the table to reduce physician payment rates this year, which doesn't support our mission and doesn't improve our ability to provide wage increases for our staff. Ongoing governmental payer increases, to at least meet the inflation rate, would be super helpful. We lobby for that, and it is always an area that we're closely looking at when those rules come out.