Connecticut’s hospitals are operating at a loss for the second year in a row as they face escalating expenses tied to labor, pharmaceutical drugs, and medical supplies and are being “underpaid” for government programs like Medicaid and Medicare, according to an independent report released by the Connecticut Hospital Association (CHA).
“We are seeing some recovery, post-pandemic, here in Connecticut as well as nationally but we still have really significant concerning trends and challenges around workforce and capacity constraints, the cost of drugs and labor growing faster than national and regional rates and administrative roadblocks,” CHA CEO Jennifer Jackson said during a press conference. “These are real and persistent concerns for the sustainability of Connecticut hospitals.”
Connecticut’s hospitals saw a negative .5 percent operating margin in 2023, compared to 2.2 percent in the Northeast/ Mid-Atlantic area, and 2.6 percent nationally, according to the report by KaufmanHall. In hard numbers, that meant an operating loss of 76 million in 2023, an improvement over 2022’s loss of $164 million but far worse than the $607 million of income they experienced in 2019 before the pandemic.
Overall, the state’s hospitals have seen $2.3 billion less in operating income since 2019, according to the report and presentation by CHA.
Median expenses for Connecticut hospitals grew by $1 billion in 2023, 1.3 percent higher than other hospitals in the Northeast/ Mid-Atlantic region, and 2 percent higher than hospitals nationally. Pharmaceutical drugs for Connecticut increased by 10 percent, compared to 9 percent for the Northeast and 6 percent nationally, while the 6.8 percent increase in medical supplies was on par with the rest of the nation.
Labor costs for Connecticut hospitals, however, greatly outpaced neighboring states and the rest of the country, rising by 4.4 percent in 2023 compared to 2.9 percent and 1.8 percent respectively.
“There was some improvement over fiscal year 2022 to fiscal year 2023 for Connecticut hospitals, unfortunately on the whole they are cumulatively operating at a loss” said Erik Swanson of Kaufman Hall. “This negative .5 percent, I should just make a point here, is really an unsustainable level of operating margin.”
Of particular note for the CHA – and for lawmakers facing a difficult budget session – are Connecticut’s payments for Medicare and Medicaid, which they say have not kept pace with rising costs and have resulted in $2.81 billion in losses, as the state only pays 74 cents on the dollar for Medicare and 62 cents on the dollar for Medicaid.
“Connecticut’s distressingly low Medicaid reimbursement lags significantly behind other states and creates barriers to healthcare access for low-income residents,” the report said. “Medicaid underfunding not only shifts costs to commercial health insurance, but it also jeopardizes access to needed care and social supports for people who are medically underserved.”
“It really is troubling and something that we have to do something about,” said Dan DeBarba, chief financial officer for Nuvance Health, noting that hospitals have to accept everyone regardless of their ability to pay whereas other practitioners do not. “That underpayment we get from government payers, we have to pass that on to commercial payers, and there was a time when that was easier to do than it is now.”
“Though we do pass some of those costs onto commercial payers, which all hospitals do across the country, the commercial payer practices have become very, very challenging,” Debarba continued. “Payers do nearly anything they can, within reason, to not pay us.”
Lawmakers at the Capitol, however, are already contending with a Medicaid program that is at least $225 million over budget due largely to increasing caseload and costs per case, according to a presentation given to the Appropriations and Finance, Revenue and Bonding Committee by the Office of Policy and Management and the Office of Fiscal Analysis.
Medicaid is one of Connecticut’s fixed costs that, along with pensions, retiree healthcare, and debt payments, take up more than 50 percent of the state’s budget. According to Medicaid.gov, Connecticut has 918,241 residents enrolled in Medicaid as of August 2024, and accounts for roughly $10.4 billion in combined state and federal funds, according to KFF. Connecticut recently expanded Medicaid coverage to undocumented immigrant children up the age of 15, which accounts for roughly $13 million of the higher-than-expected costs.
Jackson said she looks forward to working with legislators on possible solutions to the Medicaid issue.
“It’s absolutely imperative that Medicaid begin to pay rates that cover the cost of care,” Jackson said. “The General Assembly has been a great partner and thought leader in looking at the issues of healthcare and hospitals’ significant role and there certainly are challenges, but we look forward to being part of the conversation. Budgeting is about priorities and they have made hospitals a priority, rightfully so, and we look forward to being in those conversations as we look for solutions together.”
The Connecticut Hospital Association was also the state’s biggest spender when it came to lobbying in 2024, spending $3.2 million. Overall, the healthcare industry took five of the top ten spots when it came to lobbying lawmakers.
Connecticut has been grappling with increasing healthcare costs with answers few and far between, and often sacrificed to political in-fighting at the Capitol. Health insurers are facing increased scrutiny following the murder of UnitedHealth CEO Brian Thompson, but problem of rising costs is across the healthcare landscape – pharmaceuticals, medical equipment, labor, and healthcare consolidation are all cited as contributing to rising costs.
Pamela Sutton-Wallace, system president for Yale New Haven Health, said hospitals also provide millions in care without any kind of payment whatsoever. “Yale New Haven provided, in fiscal year 23, $191 million in free or discounted care. That’s not even talking about the uncompensated portion of Medicare and Medicaid patients that don’t cover our costs. That’s another $500 million.”
The CHA said Connecticut hospital provided “over $130 million in charity care” in 2022, in response to some lawmakers calling for increased charity care and more clear financial assistance options under a 2024 bill that never came to a vote.
“This is about patients, and this is about community,” Jackson said. “It’s essential that we have solutions.”
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