‘It’s an ugly year in healthcare’: Hospitals post record losses in 2022

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

Beth Israel Lahey Health, the state’s second-largest health system, reported an operating loss of $200.7 million, the first loss for a system created through a 2019 merger.

In addition, Tufts Medicine, formerly known as Wellforce, reported an operating loss of $398.6 million. And UMass Memorial reported an operating loss of $38.3 million, which was softened by the sale of its $189 million stake in Shields Health Solutions in October 2021.

Although the hospitals did not have access to the large federal aid that helped offset losses in the previous two years, the losses in the last fiscal year would have been greater without the state directing the allocation of funds from the federal American Rescue Plan to them.

The financial difficulties are consistent with what hospitals across the country are experiencing and are likely to continue for the foreseeable future, said David E. Williams, president of Boston-based consulting firm Health Business Group.

“Specifically, there are expectations that labor costs are at a high level and will not go back,” he said.

However significant the losses, many hospitals have cash reserves and other assets to help them cope.

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

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

However, Gandy noted that Mass General Brigham still needs to take steps to conserve money, or it won’t have enough funds for short-term maintenance and capital improvements. Among those under consideration are eliminating vacant administrative positions and limiting external spending, including marketing.

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

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

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

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

But like its peers, UMass has begun to cut administrative costs, with Dixon saying the system already plans to cut $1 million.

Health consultant Williams said even cutting administrative costs was not without its drawbacks.

A radiologist friend of Williams told him that his hospital in Massachusetts had cut back on staff who order MRIs, so the imaging tests weren’t used as often, Williams said. “So revenue is down and patients are upset. It’s not easy. You’re going to see some cuts in the back office, you’re going to see some use of automation. But you can only do so much.

Hospitals are also trying to ease backlogs of discharges to boost revenue. In November alone, 1,000 patients waited, sometimes for weeks, to be discharged from hospitals to skilled nursing facilities and rehabilitation centers, according to a report by the Massachusetts Health and Hospital Association, because the latter facilities were simply understaffed.

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

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

Dixon proposed additional statewide solutions, including giving the most overcrowded health systems first access to beds for a limited number of skilled nursing facilities.

Although the cost of temporary labor has fallen from its peak, hospitals are trying to use less of it to reduce costs. The MGB said it has been increasingly recruiting nurses since school and is currently completing the training of a large group of nurses.

The system is also trying to better retain the nurses it has through professional development programs, career development programs and salary increases. Tufts also announced an across-the-board raise of 3 percent this month and raised the minimum wage from $15 to $17.

“The combination of these two things adds to our salary cost base, but what choice do you have?” Storto, Tufts’ executive director, said.

While the hiring may ease labor pressures, there are roughly 19,000 unfilled health care jobs statewide, according to an October report from the Massachusetts Health and Hospital Association.

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, in addition to billions in other federal aid money.

The Federal Emergency Management Agency has also awarded millions to some hospitals in Massachusetts. While Mass General Brigham said it has not yet submitted claims to FEMA, Tufts said it received $35 million in the current fiscal year from the federal agency, expects another $6 million and will request another $21 million.

While the state has federal aid funds remaining, other major federal aid packages have largely run out. Williams said there aren’t many new federal funding programs on the horizon.

Michael Sroczynski, senior vice president and general counsel of the Massachusetts Health and Hospital Association, hopes that changes.

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

Jessica Bartlett can be reached at [email protected] Follow her on Twitter @ByJessBartlett.

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