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Hospitals are struggling as costs rise. Insurers aren’t helping.

A new report from the American Hospital Association finds that the financial instability of hospitals continues to grow as the costs for caring continue to rise.

Hospitals are struggling.

And according to a new report from the American Hospital Association (AHA), health insurers aren’t doing anything to make it easier. In fact, they’re making it worse.

After a three-year battle against the COVID-19 pandemic, critical workforce and medical supply shortages, and unprecedented inflation rates, hospitals and health systems are still showing up, making sure communities have access to healthcare.

Which isn’t getting any easier, as the costs associated with keeping hospitals open—such as the equipment, physicians, nurses, building maintenance, and administrative staff—keep rising.

Between 2019 and 2022, hospitals experienced a 17.5 percent increase in overall hospital expenses, according to Syntellis Performance Solutions. “In fact,” reports the AHA, “over half of hospitals ended 2022 operating at a financial loss — an unsustainable situation for any organization in any sector, let alone hospitals.” 2023 has not fared much better.

According to the report, one of the chief reasons for the rise in expenses is the high burden of administrative costs from billing and insurance. Unnecessary prior authorization requirements and improper claim denials, specifically, add a significant administrative cost burden on hospitals.

HealthAffairs reports that administrative costs account for as much as 31 percent of total health care spending—82 percent of which can be attributed to billing and insurance. (That’s a whole lot of money dedicated to jumping through insurer hoops.) This is particularly ironic, given the fact that insurers claim they’re trying to keep healthcare costs down.

The cost burden is only continuing to weigh hospitals down. And it’s not just a waste of money—it’s also a waste of time. While an AHA survey found that 84 percent of hospitals reported the cost of complying with insurer policies is increasing, 95 percent reported increases in time spent seeking prior authorization approval. In a recent survey conducted by Morning Consult on behalf of the AHA, nearly 75 percent of nurses reported increases in insurer-required administrative tasks for medical services over the last five years. To add insult to injury, nearly 9 in 10 nurses reported these insurer administrative burdens negatively impacted patient outcomes.

“With a narrowing menu of options for hospitals to choose from in responding to insurer administrative expenses, 78% of hospitals report their experience with commercial health insurers is getting worse,” according to the article.

By making hospitals jump through administrative hoops, insurers are limiting hospitals’ cash flow in a time when health systems are already skating on razor-thin margins.

It’s time for policymakers to step in and protect our hospitals from finally breaking the ice and outright drowning.

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