Crain’s Op-Ed: Hospital financial strain is unsustainable, threatens access to care

Brian Peters

Brian PetersCrain’s Detroit Business published an op-ed from MHA CEO Brian Peters Sept. 22 on the unsustainable financial strain currently being experienced by Michigan hospitals and health systems. The op-ed was in response to a Sept. 2 Modern Healthcare article detailing the struggles of hospitals nationwide.

Peters describes the untenable situation where hospitals are experiencing skyrocketing costs combined with stagnant and inadequate reimbursement and staffing challenges. Statewide, Michigan has lost approximately 1,700 staffed hospital beds since 2020 due to lack of available staff. Peters also mentioned the many actions the MHA and member hospitals are taking to address these challenges.

“Multiple factors have contributed to the drain on hospital resources: fewer workers, increasingly sicker patients, and higher costs that cannot keep up with inflation,” said Peters. “According to a new American Hospital Association report, the average length of a hospital stay rose almost 10 percent from 2019 to 2021. Compensation for direct jobs in nursing and residential care rose by about $200 million from 2019 to 2020, but the number of jobs fell by about 11,000. Hospital labor expenses per patient also increased 19 percent. Health care reimbursement is unable to quickly respond to inflation since rates are negotiated in advance, presenting additional financial challenges.

AHA Trustee Insights Outlines Financial Turnaround and Succession Planning

The latest edition of Trustee Insights, the monthly digital package from the American Hospital Association (AHA), is now available.

The June issue includes an article written by leading governance expert Jamie Orlikoff, who discusses the severe financial crisis caused by the COVID-19 pandemic and approaches for boards to effectively oversee the financial turnaround of their organizations.

Another article outlines the profoundly negative consequences of acute care hospital CEO turnover and why succession planning must match the organizations’ current talent with the needs of its future. Additionally, it offers recommendations for evidence-based succession planning.

These resources are available free for AHA members. For information about MHA trustee resources or webinars, contact Erin Steward at the MHA.

Healthcare Remains Michigan’s Largest Private-sector Employer Despite Pandemic Losses

Economic Impact in Michigan infographic

Provides Nearly 572,000 Direct Jobs, 224,000 in Hospitals Alone

Economic Impact in Michigan infographicThe Partnership for Michigan’s Health reports healthcare directly employed nearly 572,000 Michigan residents in 2020, demonstrating that healthcare continues to be the largest private-sector employer in the state despite staffing losses attributed to the COVID-19 pandemic. The 2022 release of The Economic Impact of Healthcare in Michigan shows direct healthcare workers in Michigan earned $44.2 billion that year in wages, salaries and benefits. Hospitals alone employed 224,000 individuals in the state in 2020.

Direct healthcare employment helps create additional jobs that are indirectly related to or induced by healthcare. These indirect, healthcare-supported jobs are held by more than 502,000 people who earned about $28 billion in 2020 in wages, salaries and benefits. Together with their employers, the nearly 1.1 million workers in the healthcare sector contributed almost $15.2 billion that year in local, state and federal taxes. These taxes include Social Security, income, motor vehicle, sales, property, corporate and more.

Data from 2020 shows the early impact the pandemic had on the economic strength of the healthcare sector in Michigan. In particular, the data illustrates the rise in labor costs as many nurses transitioned to contract labor with staffing agencies. Compensation for direct jobs in Nursing and Residential Care rose by about $200 million from 2019 to 2020, although the number of jobs fell by about 11,000. Specific to hospitals, the number of jobs fell by about 7,000 jobs from 2019 to 2020, but total compensation remained about the same.

The loss in jobs represents the initial exit of many healthcare workers due to burnout and stress associated with the pandemic. Both nationally and in Michigan, healthcare experienced a shortage of healthcare employees for several years and the pandemic caused a sudden loss of existing workers. With Medicare beneficiaries in Michigan increasing by more than 8% over the past five years to a total of 2.1 million people, Michigan needs more healthcare workers, now more than ever, to serve the changing needs of the state’s aging population.

The trend of nurses transitioning to contract labor is supported by recent research from the American Hospital Association, which found labor expenses per patient for hospitals increased 19% through 2021 compared to 2019. Increased labor expenses have a more profound impact on hospitals and health systems, as labor expenses account for more than 50% of total expenses for most hospitals. In addition, healthcare reimbursement is unable to quickly respond to inflationary pressures since rates are negotiated months in advance, presenting additional financial challenges when responding to sudden labor market demand.

The report was compiled by the Partnership for Michigan’s Health, which consists of the Michigan Health & Hospital Association, the Michigan State Medical Society and the Michigan Osteopathic Association, all based in the greater Lansing area. It uses 2019 and 2020 data, which is the most recent available.

“This report demonstrates the unquestionable and significant role healthcare, and specifically hospitals, play in Michigan communities,” said Michigan Health & Hospital Association CEO Brian Peters. “Not only have they played a vital role in the care and treatment of patients, but they remain far and away the leading employers and large drivers of economic activity.”

“Healthcare careers are not only extremely rewarding, but crucial to our society,” said Kris Nicholoff, executive director of the Michigan Osteopathic Association. “While healthcare careers remain in high demand, the data shows there are over a million individuals we owe our gratitude toward for providing care during one of the most trying and tumultuous years in modern history.”

“Physicians are and will continue to remain a key driver of healthcare employment and economic growth,” said Julie L. Novak, CEO of the Michigan State Medical Society. “Investing in physician-led team-based care and healthcare careers is key to the economic vitality and health of our state, local communities and residents. Physician practices, hospitals and other care settings offer good paying and stable jobs in careers that truly improve and save lives.”

Hospitals and healthcare providers remain focused on ensuring these jobs meet the needs of their employees, from offering competitive compensation and benefits to ensuring a safe and supportive work environment. The Partnership for Michigan’s Health joined several other organizations in the Healthcare Workforce Sustainability Alliance to advocate for state funding to support the recruitment, retention and training of healthcare workers. These efforts were successful in Public Act 9 of 2022 which allocates $300 million in state funding to support Michigan’s healthcare workforce.

The 16th and 17th editions of The Economic Impact of Healthcare in Michigan were compiled using IMPLAN® cloud software to quantify healthcare’s significant economic impact in the state. The data represents direct, indirect  and induced  healthcare jobs; taxes paid by those workers and their employers; and salaries, wages and benefits earned. The report is an online, interactive tool that allows users to examine these economic impacts from a statewide perspective and by region, county or congressional district. The data from both 2019 and 2020 is provided in two separate data tables. It is available at www.economicimpact.org.

MHA CEO Report — Time to Focus on Cybersecurity

MHA Rounds Report - Brian Peters, MHA CEO

MHA Rounds Report - Brian Peters, MHA CEOThe world-altering powers that technology has delivered into our hands now require a degree of consideration and foresight that has never before been asked of us.” ― Carl Sagan

A long-held practice utilized by businesses of all stripes is the ubiquitous SWOT (strengths, weaknesses, opportunities and threats) analysis. For a hospital or health system in 2022, there is no shortage of candidates to fully stock the “threat” category. In this column, I want to draw attention to one that deserves increased attention because of its potential to cripple an organization in an instant: cybersecurity.

The wonders of technology have dramatically improved healthcare in Michigan and beyond. Advancements include imaging technology that identifies serious disease at a much earlier stage, robotic devices that permit surgical interventions that were previously considered too risky to attempt, remote patient monitoring and telehealth, and electronic medical records that facilitate better tracking and coordination for patients across various sites of care — the list is impressively long.  And amid our current workforce shortage crisis, we often describe technology in healthcare as a “force multiplier” that can supplement and extend our limited staffing resources to help ensure adequate access to care.

Make no mistake, healthcare still has one foot on the proverbial dock and one foot in the proverbial boat. That is, many of our communications and services remain in the “analog” world, while a growing share have become electronic, digitized and inter-connected. This phenomenon — coupled with the fact that the personal health information we collect and store has more value on the black market than any other data — has painted a neon target on our back for a growing cadre of cybercriminals and adversarial nation states. It is no accident the FBI has identified healthcare as the number one target of these bad actors. And simply put, a cyberattack on a hospital is a “threat to life” crime. We must act accordingly.

The statistics on healthcare attacks are enough to keep any executive up at night. An attack on a midsize hospital creates an average shutdown time of 10 hours and costs on average $45,700 per hour, according to an Ipsos report. In the same report, 49% of the respondents said their annual compliance budget for cybersecurity wasn’t enough. According to IBM, a data breach at a healthcare organization costs more than any other sector at $10.1 million. And the threat continues to grow, as healthcare cyberattacks have increased by 84% from 2018 to 2021, according to Critical Insight. Michigan hospitals, health insurance companies, physician offices and others have been the victims of ransomware attacks and related cybercrime in recent years.

If this wasn’t bad enough, a spotlight was shone on cybersecurity this past spring during Russia’s invasion of Ukraine, when cyberattacks on the Ukrainian government and critical infrastructure organizations had the potential to ripple across multi-national organizations and infect U.S.-based operations, including healthcare. Experts believe this scenario will be part of every future global conflict. And unfortunately, for many hospitals and health systems who welcome patients from multiple foreign countries, and who have business partners outside the United States, the practice of “geo-fencing,” or blocking all incoming email traffic from outside the country, is not always a viable approach.

So where can hospitals and health systems turn for help? At the national level, the American Hospital Association anticipated this trend several years ago and employs John Riggi as the national advisor for cybersecurity and risk. John has been a resource for the MHA in the past and as a former leader within the FBI’s cybercrime division, he maintains close ties with all the relevant government agencies.

And here at the MHA, we are also very committed to strengthening our own cyber defenses, while doing the same for our members. We have appointed Mike Nowak to serve as our own Chief Information Security Officer. Several years ago, Mike and his team helped to launch, and have subsequently helped to operate, the Michigan Health Security Operations Center (Mi|HSOC) for hospitals and health systems. Created for healthcare providers by healthcare providers, this first of its kind entity has the proven ability to prevent, detect, analyze and respond to cybersecurity events. Operating 24/7/365, the Mi|HSOC has developed strong relationships and communication with law enforcement at various levels, including the Michigan State Police Cyber Division, FBI and Secret Service.

An organization that helped form the Mi|HSOC is CyberForce|Q, which is now an MHA Service Corporation Endorsed Business Partner. In addition to sharing tactical information on emerging threats with the members of the security operations center, CyberForce|Q offers a variety of additional cybersecurity services to our members and other healthcare clients.

The bottom line — the MHA and our partners have helped Michigan become a leader in this space. By mitigating potential risk, physicians, nurses and staff of our member hospitals have the best opportunity to provide exceptional patient care without any external interruptions. While the advocacy, policy and safety and quality areas of the association often receive public attention, our cybersecurity efforts are constantly at work, often without much notice, to protect healthcare in Michigan.

But we need your help. I am the farthest thing from an expert in this field, but one thing I have learned is that the “human factor” is the most critical element of our defenses — and therefore the most vulnerable. Think twice before opening a suspicious email or text message, safeguard your electronic devices and passwords and take the time to educate yourself on all of the best practices to follow in the midst of this new, online world. The health of your patients and communities may depend on it.

As always, I welcome your thoughts.

MHA Meritorious Service Award Recognizes Wright Lassiter III

The MHA announced the 2022 winner of its highest achievement award June 30 during the association’s Annual Membership Meeting. Receiving the award for his leadership in the fight against COVID-19 is Wright Lassiter III,  2022 chair of the American Hospital Association Board of Trustees and former president and CEO of Henry Ford Health.

At the onset of the pandemic in March 2020, Lassiter became a leading advisor to the City of Detroit and state officials. Under his leadership, Henry Ford Health quickly charted a path for vaccine research and served as a leader for the trials of the Moderna and Johnson & Johnson vaccines. Henry Ford Health was chosen as the medical director for the state’s mass vaccination site on Detroit’s Ford Field. It was the first health system in the state to require workforce vaccination across its multiple locations, helping to keep its staff, patients, visitors and communities safe. Lassiter also provided input and guidance to the governor’s office during the pandemic as a member of the Michigan Economic Recovery Council.

Wright Lassiter III receives the MHA Meritorious Service Award from MHA CEO Brian Peters.
Wright Lassiter III receives the MHA Meritorious Service Award from MHA CEO Brian Peters.

Lassiter has more than 30 years of experience in large, complex health systems. He joined Henry Ford Health as president in December 2014 and became president and CEO in 2016. During his tenure, he has led the board and senior management to position the system for the future, completing two successful mergers, expanding its geographic footprint, generating an additional $1 billion in revenue, and opening partner hospitals in Saudi Arabia and India.

Lassiter has received many accolades, being named Crain’s Detroit Business’ Newsmaker of the Year in 2022 and Michiganian of the Year by The Detroit News in 2020, receiving the 2021 Crain’s Detroit Business Health Care Heroes – Corporate Achievement Award, and more. Lassiter gave the Spencer C. Johnson Health Policy Lecture June 30 during the 2022 MHA Annual Membership Meeting. In August, he will become the CEO of Chicago-based CommonSpirit Health.

Headline Roundup: Price Transparency, Workforce Challenges and Contrast Media Shortages

Brian Peters

Brian PetersThe MHA responded to several media requests the week of May 16 on topics including the RAND 4.0 Hospital Price Transparency Study, hospital workforce challenges and the shortage of contrast media from GE Healthcare.

MiBiz and Crain’s Detroit Business published stories on the latest RAND report that includes multiple quotes from MHA CEO Brian Peters discussing the flaws associated with the study, including the use of Medicare as a reimbursement benchmark and the limited data set. The MiBiz story also cites recent findings from the American Hospital Association and Kaufman Hall on significantly increasing hospital expenses.

“So it’s not a comprehensive set. It’s looking very specifically at Medicare reimbursement rates, which we know in Michigan and other states as well does not cover the true cost of care,” said Peters to MiBiz. “Hospitals do everything they possibly can just to break even, at best, and still lose money on Medicare.”

Michigan Radio aired a feature on May 16 following an interview with Peters on workforce challenges impacting hospitals.

“We are losing employees to McDonald’s for a job that pays better and is less stressful,” said Peters. “And we are incredibly limited in our ability to compete with rising wages in other industries.”

Crain’s Detroit Business published an additional article May 18 on the topic that cited the Michigan Radio story and quotes Peters. Laura Appel, executive vice president of government relations and public policy, MHA, also spoke with WZZM-TV Channel 13 for a story on workforce challenges that aired May 19.

The Detroit Free Press and Fox 2 Detroit also reached out earlier in the week on the reported shortage of contrast media from GE Healthcare. A general statement was provided to reflect the varying impacts from the shortage on hospitals throughout the state.

MHA Showcases Healthcare Workers for National Hospital Week

Hospital Week Graphic

Every year, National Hospital Week serves as an opportunity to highlight hospitals, health systems, healthcare workers and the innovative ways they are supporting and connected to the community. For 2022, the MHA celebrated by showcasing member hospital and health system staff across social media channels. Each day of the week, short videos featured staff from across the state — nurses, volunteers, technicians, etc. — sharing what they love about working in healthcare.

The videos aligned with the American Hospital Association’s #WeAreHealthcare efforts, offering a more local perspective from caregivers who have taken on unimaginable challenges and risen to the occasion repeatedly over the course of the pandemic. Submissions came from healthcare workers across the state, including staff from Beaumont Health, Henry Ford Health, Hurley Medical Center, Pine Rest Christian Mental Health Services and Sparrow Health System.

The videos totaled more than 40,000 impressions (the number of times content was seen) and more than 1,500 engagements across Facebook, Twitter and Instagram. Questions about the MHA’s 2022 National Hospital Week campaign should be directed to Lucy Ciaramitaro at the MHA.