Alabama hospitals say they face an ‘existential crisis’ after COVID, ask state for financial help

By Ramsey Archibald | rarchibald@al.com

The COVID-19 pandemic dealt a blow to Alabama hospitals in terms of finances, say healthcare officials, who are now predicting nearly 15 hospitals around the state are in danger of closing. They are asking the state for relief money to meet payroll as the cost of labor has jumped.

“The situation is dire. It’s immediate,” said Joseph Marchant, chairman of the Alabama Hospital Association and CEO of Bibb Medical Center. “There’s an immediate need. We hope [the Legislature] considers soon, the fragile state of where we are.”

Alabama hospitals earned billions of dollars less in 2022 than they did before the pandemic began, according to a report released Thursday, and half of the state’s hospitals operated at a loss that year. That’s in part due to rapidly rising pay and to fewer patients last year. The report by consulting firm Kaufman Hall was commissioned by the Alabama Hospital Association.

Healthcare leaders on Thursday said Alabama hospitals need additional COVID relief funds from the Alabama Legislature just so hospitals can make payroll and some can avoid closure.

“Alabama hospitals face an existential crisis in terms of survival,” Dr. Donald Williamson, head of the Alabama Hospital Association, said during a press conference Thursday. Williamson said that there are 15 or so hospitals in the state that are in ‘immediate risk of closure,’ and that, without help, several will likely close over the next year or two. Relief funds would only be a short term solution, he said.

“We need that bridge,” Williamson said. “We need those funds so we can keep our hospitals open.”

Hospitals got federal funds during the pandemic to help offset losses. Even so, the state’s hospitals saw income decline by $1.5 billion from 2019 to 2022, according to the report. Without that previous federal funding, Alabama hospitals would have seen income decrease by $2.4 billion, according to the report.

“If it had not been for that federal funding, we probably would have fewer hospitals today,” Williamson said. “What we desperately need is a significant infusion of [American Rescue Plan Act] funds to serve as a bridge.”

Healthcare leaders said some hospitals in other parts of the country are laying workers off, cutting services and more the help make ends meet. There have been talks in Alabama of hospitals cutting staff or services, but officials say even that likely won’t help keep them open for long.

“We’ve got to have ARPA funds so that we can have all of our hospitals make payroll now,” Williamson said. He said hospitals can cut expenses, but that will reduce revenue. “It’s a death spiral,” he said.

Findings

The report detailed a $1.5 billion loss in income for the state’s hospitals, including hospitals in both rural and urban areas.

Hospital expenses boomed during the pandemic and in most cases only increased in 2022 - the worst year for Alabama hospitals since the pandemic began. By last year, expenses had increased by nearly $2.6 billion - or 20% - since 2019. There were many factors driving up expenses, but the biggest was staffing - the cost of labor was up by nearly $1.4 billion between 2019 and 2022.

That includes both salaried and contract labor - the latter of which, while comprising only 10% of the hours worked at state hospitals, accounted for roughly 25% of the increase in labor costs last year.

Hospitals are also seeing fewer patients, while the patients they are seeing are often sicker and stay longer. Longer stays mean more expenses for the hospital, without a comparable increase in revenue, according to the report.

All of this led to half of Alabama hospitals operating at a loss in 2022. It’s not uncommon for hospitals to operate with a negative margin - back in 2019, before the pandemic, 22% of Alabama hospitals were operating in the red. But that number has more than doubled. Alabama hospitals as a whole saw the operating margin - or revenue minus expenses - fall by nearly $740 million from 2019 to 2022, a decrease of 106%.

Kaufman Hall, which issued the Alabama hospital report, did a similar study back in September of 2022 detailing the situation in hospitals across the country. Hospitals throughout the United States are seeing similar issues to those in Alabama, but in nearly every case, Alabama’s situation is worse than the national average.

You can read the full Kaufman Hall report here.

Do you have an idea for a data story about Alabama? Email Ramsey Archibald at rarchibald@al.com, and follow him on Twitter @RamseyArchibald. Read more Alabama data stories here.

Alabama hospitals say they face an ‘existential crisis’ after COVID, ask state for financial help - al.com