‘It’s an ugly year in health care’: Hospitals report record losses in 2022

‘It’s an ugly year in health care’: Hospitals report record losses in 2022 unknown

Mass General Brigham, the state’s largest health system, reported a $432 million operating loss, the largest in its 28-year history. That figure beat the previous low mark of a $350 million loss in the first year of the pandemic.

Beth Israel Lahey Health, the state’s second largest health system, reported a $200.7 million operating loss, the first loss for a system that was formed by a merger in 2019.

Additionally, Tufts Medicine, previously known as Wellforce, reported a $398.6 million operating loss. And, UMass Memorial reported a $38.3 million operating loss, which was tempered by the sale of its $189 million stake in Shields Health Solutions in October 2021.

While hospitals did not have access to the large federal aid that helped address losses in the previous two years, the losses in the most recent fiscal year would have been larger without the state funneling distributions of federal American Rescue Plan Act funds to them.

The financial hardship is consistent with what hospitals across the country are experiencing, and will likely persist for the near future, said David E. Williams, president of Boston consulting firm Health Business Group.

“In particular, there is an expectation that labor expenses are at a high level and won’t snap back,” he said.

As significant as the losses are, many hospitals have cash reserves and other assets that will help them pull through.

“They are having a tough year this year,” said John McDonough, with the Department of Health Policy and Management at the Harvard School of Public Health. “And a lot of them, a significant number of them, are sitting on a significant amount of accumulated profits.”

Niyum Gandhi, chief financial officer of Mass General Brigham, said the 12-hospital system has the financial wherewithal to  weather this storm.

However, Gandhi noted Mass General Brigham still needs to take steps to preserve money, or it won’t have enough funds for near-term maintenance and capital improvements. Among those under consideration are eliminating  vacant administrative positions and curbing outside spending, including marketing.

“We need to be fiscally prudent here,” Gandhi said. “When financial times are tighter, you . . make some tougher decisions.”

Many health systems have also focused their belt-tightening on reducing administrative expenses.

David Storto, executive vice president for Tufts Medicine, said the 1,100-bed system is “looking at everything” to address the financial picture, including limiting most administrative expenses and discretionary expenses like travel, and evaluating which vacancies to fill.

UMass Memorial Health stressed that cutting clinical roles is not feasible, given how busy the four-hospital health system is. On Friday, Dickson said there were 70 patients in the emergency room waiting for a bed, and its medical center was declining up to half of transfer requests from other hospitals.

But similar to peers, UMass has begun to reduce administrative costs, with Dickson saying the system was already planning to cut $1 million.

Health consultant Williams said that even administrative cost cutting isn’t without its drawbacks.

A radiologist friend of Williams told him his Massachusetts hospital laid off staff who schedule MRIs, so the imaging tests aren’t being used as often, Williams said. “So revenue goes down, and patients are upset. It’s not easy. You will see some cuts on back office, see some use of automation. But there’s only so much you can do.”

Hospitals are also trying to ease the backlog in discharges to boost revenue. In November alone, 1,000 patients were waiting, sometimes for weeks, to be discharged from hospitals to skilled nursing facilities and rehab centers, according to a report from the Massachusetts Health and Hospital Association, because the latter institutions simply do not have enough staff.

Hospitals are trying to solve the problems on their own, with Mass General Brigham and UMass Memorial expanding hospital-at-home programs to open up more capacity. UMass Memorial is also responding to a request from the state for a skilled nursing facility at-home program, using technology and its own resources to facilitate discharges of hospital patients.

Meanwhile, Tufts is in discussions with several facilities to give its patients first access to skilled nursing beds.

Dickson suggested additional statewide solutions are necessary, including giving those health systems that are the most crowded first access to limited skilled nursing facility beds.

While the cost of temporary labor has come down from its peak, hospitals are trying to use less of it to reduce spending. MGB said it has increasingly  recruited nurses right from school, and is currently wrapping up training of a large group of nurses.

The system is also trying to better hold onto the nurses it has through professional development programs, career pathway programs, and wage increases. Tufts also announced across the board 3 percent raises this month and increased its minimum wage from $15 to $17.

“The combination of those two things add to our salary expense base, but what choice do you have?” Storto, the Tufts executive, said.

While recruitment might ease the labor strain, there are an estimated 19,000 unfilled health care jobs statewide, according to a report from the Massachusetts Health and Hospital Association in October.

Many hospitals continue to receive state and federal funds to offset some of the losses. In November, the state approved another $350 million package for hospitals. To date, Massachusetts hospitals have received $681 million in ARPA funding, on top of billions in other federal relief money.

The Federal Emergency Management Agency has also given out millions to some Massachusetts hospitals. While Mass General Brigham said it hasn’t yet filed any claims with FEMA, Tufts said it has received $35 million in the current fiscal year from the federal organization, is anticipating another $6 million, and will ask for another $21 million.

While the state has remaining federal relief money to hand out, other large federal aid packages have largely dried up. Williams said there aren’t many new federal funding programs on the horizon.

Michael Sroczynski, senior vice president and general counsel for the Massachusetts Health and Hospital Association, hopes that will change.

“Action must be taken at the federal level to make additional funding available for the providers who have pulled our nation through the past three years,” he said in a statement.

Jessica Bartlett can be reached at jessica.bartlett@globe.com. Follow her on Twitter @ByJessBartlett.