Hospital Funding Crisis

Hospital Viability

Michigan communities are at risk of losing access to quality healthcare if we don’t address the funding crisis our hospitals are currently facing.

Residents deserve quality, accessible healthcare services and without hospital resources to adequately provide that care, Michigan hospitals have and will continue to resort to reducing their available beds or no longer offering services. Michigan has lost a high of about 1,700 staffed hospital beds since 2020. This creates a cascade of problems, from longer wait times in the emergency department, reduced services, particularly in rural areas, and more difficulty transferring patients to the appropriate care setting.

Multiple factors have contributed to the drain on hospital and health system resources including a reduction in the workforce and talent pipeline; increasingly sicker patients; rising costs of personal protective equipment, technology and drugs; and the impact of America’s rising inflation. Without quality, accessible hospitals and healthcare systems, our communities will suffer the economic impacts of losing residents without a plan to replace them.

Healthcare workers are leaving the field and the pipeline to replenish and sustain those jobs requires time and a significant funding investment.

Despite staffing losses attributed to the COVID-19 pandemic, healthcare directly employed nearly 572,000 Michigan residents in 2020, continuing to make it the largest private-sector employer in the state.

As a result, more nurses are transitioning to contract labor driving up expenses for hospitals to an increase of 19% through 2021 compared to 2019.

Within the next five years, the U.S. faces a projected shortage of more than 3.2 million lower-wage healthcare workers such as medical assistants, home health aides and nursing assistants, according to a Mercer report. According to the U.S. Bureau of Labor Statistics, nationally there will be a need for 1.1 million new registered nurses by 2030.

Further, labor expenses account for more than 50% of total expenses for most hospitals. Michigan hospitals are spending $1.1 billion more on labor expenses in 2022 than 2020. Healthcare reimbursement is also unable to quickly respond to inflation since rates are negotiated months in advance, presenting additional financial challenges when responding to sudden labor market demand.

Michigan has prioritized recent short-term solutions for addressing this hospital funding crisis but the short-term solutions that have provided temporary relief won’t fix long-term problems.

A healthy economy requires hospitals and health systems that offer a wide range of services and resources that extend access to care well beyond just the traditional hospital setting. The healthcare workforce shortage — combined with an aging population, a rise in chronic diseases and behavioral health conditions and advancements in medical care delivery — all contribute to an immediate need for resources that will allow hospitals to continue to provide the care residents need and deserve.

Michigan lawmakers must do more to help our hospitals. A solution that combines both short-term options with long-term opportunities is necessary to ensure that Michigan residents continue to have access to healthcare services.

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