The Arizona Hospital and Healthcare Association (AzHHA) released today a new hospital financial analysis that reveals a bleak picture of Arizona hospital finances and reveals how Arizona hospitals are facing significant financial challenges.
The AzHHA Quarterly Financial Analysis analyzes first and second quarter 2022 financials relative to the previous year among 21 member hospitals. The data shows hospital net operating margins fell from an average of 4.6% in 2021 to .5% in the first quarter of 2022 and then plunged to -8.7% in the second quarter of 2022.
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“These losses have been driven by extraordinary inflation in the labor and supply market, with contract labor increasing by 188% in the first quarter of 2022 and by 263% during the second quarter compared to the same periods in 2021,” said Ann-Marie Alameddin, president and CEO of AzHHA. “Despite these alarming numbers, hospitals have never wavered from their commitment to providing lifesaving care and essential public health services.”
Arizona hospitals’ financial challenges were exacerbated by the unprecedented pressures of COVID-19. During the initial wave of infections, hospitals were forced to cancel all non-emergent procedures, sending finances into a tailspin. Congress stepped in by providing some relief through the Coronavirus Aid, Relief and Economic Security Act of 2020 and the American Rescue Plan Act of 2021. While this assistance helped to stabilize hospital finances temporarily, pressures on the supply chain and labor market have persisted into 2022 resulting in a dire impact on hospital finances.
“Payments from public payers and commercial payers alike must account for the extraordinary strain on hospital and health system expenses in this post-COVID world,” said Alameddin. “Without this recognition, patients’ access to quality care is jeopardized.”
The numbers, at a glance:
Operating margins significantly declined during the first half of 2022 compared to 2021. Hospitals reported net operating margins fell from an average of 4.6% in 2021 to .5% in the first quarter of 2022, and then plunged to -8.7% in the second quarter of 2022.
Losses have been driven by extraordinary inflation in the labor and supply market, which public and commercial payers are not fully accounting for. Contract labor costs increased 170% during the first quarter of 2022 and 231% during the second quarter of 2022 compared to the same period last year. So far this year, the cost of drugs has risen 13%, medical supplies 8% and salaries and wages 7% compared to 2021.