Minnesota Hospital Association Reports Growing Financial Struggles for State’s Health Systems

Minnesota Hospitals Facing Financial Crisis Amid Rising Costs and Patient Overload

The Minnesota Hospital Association sounded the alarm on Monday, revealing that a majority of the state’s health systems are struggling to stay afloat financially. According to a recent survey conducted by the MHA, 67 percent of its members reported losses in the first half of 2023, a significant increase from the 55 percent that reported negative operating margins in 2022.

Dr. Rahul Koranne, President of the MHA, painted a grim picture of the situation, likening hospitals to individuals hanging from a dangerous cliff, their strength waning. He pointed to rising labor costs, inflation driving up supply and service expenses, and the burden of caring for Medicare and Medicaid patients at reimbursement rates that fall short of actual costs.

One of the most pressing issues highlighted by Koranne is the lack of capacity in the mental health system, leading to patients being stranded in emergency rooms. “There are thousands of patients that are stuck inside our hospitals because hospitals right now are functioning as a group home, as a nursing home, as a mental health institution,” he lamented.

The financial strain has already resulted in the closure of over 50 hospitals nationwide, with rural facilities bearing the brunt of the crisis. Steve Parente, a health care finance expert at the University of Minnesota, pointed out that the state’s aging population is driving hospitals to rely more heavily on Medicare payments, which are significantly lower than those from private insurance.

As budget negotiations in Congress continue, Parente warned that it may take a wave of hospital closures and consolidations to spur lawmakers into action on increasing reimbursement rates for Medicare and Medicaid. He also noted that the pandemic-induced staff burnout has exacerbated labor shortages in the healthcare sector.

While the MHA did not disclose the detailed data behind its financial report, Parente called for a more comprehensive analysis to understand the underlying trends within individual institutions and health systems. Meanwhile, the Mayo Clinic, a notable exception to the MHA survey, stands out with strong financial performance, reporting operating income in the hundreds of millions of dollars.

With hospitals teetering on the edge of a financial precipice, stakeholders are calling for urgent action to prevent a healthcare crisis in Minnesota.