Over a dozen Pennsylvania hospitals could close, report says

Pennsylvania hospitals are facing serious financial pressures, and more than a dozen hospitals are at risk of shutting their doors in the near future, according to a new report.

As many as 12 to 14 Pennsylvania hospitals are facing the risk of closure in the next five years due to inadequate state support and insufficient payments from insurers, according to an analysis by Oliver Wyman, a consulting firm. The Hospital and Healthsystem Association of Pennsylvania commissioned the report, which was released Wednesday.

Hospitals across the nation are facing financial headwinds, but Pennsylvania’s hospitals are dealing with more challenges than those in some other states, says Nicole Stallings, president and CEO of the Hospital and Healthsystem Association of Pennsylvania.

“Access in Pennsylvania has already been strained, and so if we continue on this current trajectory, unfortunately, we will see service closures and hospitals closed,” Stallings tells Chief Healthcare Executive®. “And that also means not just access to health care being impacted, but jobs and economic activity in our local communities would also be impacted.”

(See part of our conversation in this video. The story continues below.)

‘A call to action’

Stallings says that she hopes the report galvanizes actions from Pennsylvania’s elected officials to provide more help for Pennsylvania hospitals.

“This report, we believe, is really a call to action that we can do something about this trajectory and better support our hospitals and their sustainability,” she says.

Medicaid reimbursements to Pennsylvania hospitals fall 11 percentage points below the national average, according to the report. On average, Pennsylvania’s Medicaid program pays hospitals 71 cents for every dollar of care they provide. About one in four Pennsylvania residents rely on the state’s Medicaid program for care.

Stallings says the inadequate Medicaid reimbursements are a prime reason for financial challenges at Pennsylvania hospitals.

“Inadequate reimbursement is the primary driver of this financial stress,” Stallings says. “But the good news is this is within the state's control. These are all factors that state policy makers can address with respect to Medicaid reimbursement, our regulatory environment, as well as our medical liability environment.”

Pennsylvania hospitals are bracing for more problems when Medicaid cuts in the HR1 tax package take effect in the coming years. Stallings says Medicaid reimbursements could drop to 64 cents for every dollar of care provided by Pennsylvania hospitals when the measures take full effect.

“I think it's important to stress that our hospitals are already feeling these pressures,” Stallings says. “We already have a significant number of our members, in fact, less than half, have operating margins needed to be sustainable long-term, and that's before any of the provisions of HR1 go into effect.”

No one wants closures

Pennsylvania’s hospitals are experiencing a $3.3 billion shortfall between expenses and patient revenues. Without more support from the state, the collective operating margin at the state’s hospitals is projected to drop from 2.9 percent to between -3.3 percent and -10.8 percent, according to the report.

The association is pushing for the state to boost Medicaid payments. And the group is asking Pennsylvania Gov. Josh Shapiro’s administration to invest $250 million over the next five years into the state’s distressed hospital fund.

The state’s rural hospitals could be in a precarious situation if policymakers don’t offer more support, Stallings says.

“They are at greater risk because those hospitals see a higher proportion of patients that are on Medicaid or Medicare, which reimburse below the cost of care,” she says. “And then we know additional cuts are coming, and so we are particularly concerned about those hospitals and the ability to maintain access in those communities.”

Pennsylvania has already experienced hospital closures. Last year, Crozer Health, which operated two hospitals in the Philadelphia suburbs, shut down in the wake of the bankruptcy of Prospect Medical Holdings. Prospect said it had to close the two hospitals - Crozer-Chester Medical Center and Taylor Hospital - after failing to find a buyer for the facilities.

Stallings doesn’t want to see any other hospitals close in Pennsylvania. She’s also worried that growing costs could spur some hospitals to reduce services.

She says she’s hopeful that lawmakers recognize the gravity of the situation for the state’s hospitals.

“I do believe more and more lawmakers are understanding the significant financial strain that our hospitals are facing and the difficult decisions they're already having to make,” she says. “But no one wants to see 12 to 14 hospitals closing in the next five years. And we believe that we've put some practical opportunities forward for state lawmakers now to help us, and we are eager to engage in those conversations.”