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Indiana hospitals facing financial strain with personnel, supply chain limitations

A perfect storm of personnel shortages and supply chain disruptions is negatively impacting hospitals’ bottom lines, according to the Indiana Hospital Association.

According to Erik Swanson, the senior vice president of data and analytics at Kaufman Hall, a healthcare management and consulting firm, 2022 was the worst year for hospital finances since the beginning of the COVID-19 pandemic, with many of the challenges are likely to carry over into 2023.

Labor shortages and supply chain disruptions have brought about challenges to many sectors of the economy and hospital systems are no different.

The IHA is a nonprofit organization that provides political representation and support to more than 160 hospitals.

Staffing shortages have affected the number of working nurses and physicians across the state, with independent contractors becoming a greater part of hospitals’ budgets.

Schools will be unable to produce enough nursing graduates to fill the growing number of vacancies throughout Indiana communities, Kreg Gruber, Beacon Health System’s chief executive officer, said during Wednesday’s press conference.

“The number of retirements, the number of those leaving the field during and after the pandemic was far exceeding the number graduating in our whole system,” Gruber said.

On the supply side, an increasing amount of equipment is purchased from overseas, which means increased costs for shipping.

Total expenses for Indiana hospitals rose $3.2 billion since the start of the pandemic, outpacing revenue, and leading to a loss of almost $72 million in 2022, according to the IHA financial report.

Indiana hospital operating margins in 2022 were well below the national median, netting a 2% loss, the report stated.

Over the last year the number of new patients began decreasing, while many of the patients coming in began staying for longer periods of time, Swanson said.

“There is an increase in average length of stay owing to sicker patients … as well as some of the widespread labor shortages leading to challenges in hospitals being able to discharge patients as efficiently,” he said.

Hospitals also struggle with funding through Medicare and Medicaid, according to Lauren Trumbo, the chief financial officer of Methodist Hospitals in Northwest Indiana.

“Medicare reimbursement doesn’t cover the actual cost that it takes to take care of these patients,” Trumbo said.

Many of the issues discussed during the IHA press conference echo the explanation made by Franciscan Alliance, during the controversial decision to close Franciscan Health Hammond at the end of 2022.

“A critical shortage of healthcare workers and a dramatic shift in patients choosing full-service hospitals elsewhere in the county makes it impossible to continue to keep an inpatient facility open,” Franciscan Health Hammond, Dyer and Munster CEO Barbara Anderson said in a November news release.

“It won’t solve itself by tomorrow, it won’t solve itself by next year… so what we’re looking at is two years from now and three years from now to get that pipeline back in,” Trumbo said.

gwiebe@chicagotribune.com