MINNEAPOLIS — The Minnesota Hospital Association (MHA) painted a bleak financial picture of the state's healthcare industry on Monday, with the release of a new report citing hundreds of millions of dollars in operating losses so far in 2023.
The MHA did not publish the full report, nor did it cite any specific hospital or healthcare systems. However, the group released highlights of a survey of more than 70 members — representing facilities of all sizes in all areas of the state — showing more than $400 million in losses through the first six months of the year. According to Dr. Rahul Koranne, the CEO and President of MHA, these losses are more than double the figures reported during the same time period in 2022. Already this year, Fairview and Allina have both announced layoffs of hundreds of employees.
Overall, two out of three hospitals included in the survey reported losing money.
"This is a pretty grave state and, I would say, quite a crisis," Koranne said. "Our not-for-profit hospitals and health care systems are hanging dangerously from this cliff and they're getting tired."
Koranne blamed part of the problem on the federal programs Medicare and Medicaid, which offer lower reimbursement rates to hospitals compared to private insurers. According to the MHA report, the proportion of patients in Minnesota using these two programs has jumped from 62 to 64%. In some facilities, Koranne said, nearly three-quarters of patients are on Medicare or Medicaid, leading to more than $2 billion in underpayment in Minnesota.
"Those reimbursements, or payments, are fixed. So, we can't raise prices. These two programs are paying significantly below the cost of providing care to our patients," Koranne said. "So, if you have 70 percent of your patients covered by these governmental programs, we can't raise prices and they're paying you below the cost of care. That's what causes [the problem]."
The hospital association also cited a 6% increase in the cost of supplies, and a 7% increase in the cost of labor.
Mary Turner, the president of the Minnesota Nurses Association, challenged some of the findings in the MHA report as they related to labor costs. Last year, during the latest round of contract negotiations, she fought for an 18% raise over three years for nurses in the Twin Cities.
"You can't run a good business without spending the money on enough staff to take care of patients properly," Turner said. "I would remind people that we haven't had anything near what the cost of living is for over a decade. And so a lot of that was just making up for lost time."
Dr. Koranne, meanwhile, identified workforce staffing as a significant challenge. He called on the state legislature to address the needs of workers and hospitals in the upcoming legislative session. (Last spring, hospital executives and labor leaders clashed over the best course of action to tackle the workforce shortage, leading to a narrower form of legislation than originally proposed by DFL lawmakers.)
"We need to really resource it in this upcoming session and many sessions to come, so that we can have workers and staff we need," Koranne said. "If we don't have the money, and if don't have the workers, we will not be providing care and that would be sad."
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