As we approach three years of the COVID pandemic, many of you have been undoubtedly reading in recent weeks that hospitals across the country are undergoing enormous financial challenges. This is true of both major academic medical centers and community hospitals.
For example, a few weeks ago the Massachusetts General Hospital/Brigham system announced that for its FY22, which ended in September, it had an operating loss of $432 million, amounting to a -2.6% operating margin. Closer to home, the Nebraska Hospital Association stated that more than half of Nebraska hospitals are operating in the red this year. Our principal adult care academic partner, Nebraska Medicine, has previously indicated that it is among that 50%. Children’s Hospital & Medical Center has remained in the black but with a major decline in its operating margin from past years.
The reasons for this financial stress relate primarily to the change in the labor market brought on by the pandemic, which all health care institutions are experiencing. Labor costs for health care workers are skyrocketing, while revenues for care are flat or decreasing. This is in part because hospitals are full and cannot make room for new patients. They often are unable to discharge patients because there is no place for them to go and recuperate. Skilled care facilities are experiencing the same workforce shortage as hospitals.
Hospitals are not paid per patient day but rather are paid based on the number of days of hospitalization that the primary condition being treated should require. So, the costs of excessive days in the hospital awaiting discharge are borne by the hospital. This challenge is exacerbated by the fact that hospitals in turn are unable to make room to provide care for new patients – a financial negative for the hospital and a risk to the health of that next patient awaiting admission for care. Hospitals such as Nebraska Medicine also have empty beds that they could fill with patients, but they are unable to hire the necessary nursing and other health care professionals to staff them.
When most businesses experience expense increases, they pass those on to their customers. That is not the case in health care, where insurance companies, including Medicare, simply refuse pay more to providers for care despite major increases in expenses to provide that care.
So, what do the financial challenges of our health care partners have to do with the success of the UNMC College of Medicine? First, we rely on the excellent clinical programs of these institutions to provide our medical students and residents/fellows with the outstanding clinical experiences that they need for their training. If these experiences are compromised by financial constraints of the health systems, our trainees suffer.
From a financial standpoint, Nebraska Medicine and Children’s related clinical care provide most of the salary support for our clinical faculty. The more than doubling of faculty over the past 10 years was almost entirely linked to the growth and success of the clinical programs at these two institutions.
What may be less clear to some in the college is the link between the economic wellbeing of both Nebraska Medicine and Children’s and the ability of the UNMC College of Medicine to achieve its academic (education and research) goals. Although we receive solid support for our education mission from the State of Nebraska and support for research from grants from the National Institutes of Health and other extramural sources, this support does not come close to covering the actual costs of these activities. As with many successful academic medical centers, we rely on the funds flow coming from the operating margin of our health system clinical programs to cover the financial shortfall of our academic missions, commonly referred to as cross-subsidization.
In our case, we have a well characterized and mutually agreed upon funds flow agreement between our college and Nebraska Medicine, as well as a separate one with Children’s, that transfers money from the health systems to the college. This support is in the many millions of dollars annually. It is used to cover financial shortfalls in education, thereby minimizing the need to increase tuition. It supports recruitment and ongoing support of researchers of all types, including our basic science faculty, that would not be otherwise possible.
Thus, regardless of our roles in the UNMC College of Medicine, we all have a vested interest in the success of our health system partners. Their success is our success, and their challenges are our challenges. We are all in this together, and we must work as a team with our health system colleagues to address their financial challenges. That includes looking at how we can help curtail expenses in the college and use the funds flow support from the health systems judiciously and productively. Please continue to provide emotional support to the health care workers who are working long hours to meet the staffing shortfalls. Encourage nurses and other health care workers you know to join the team. Make sure that you communicate to others, including those in decision-making roles in government, about how critical it is that they find ways address this financial crisis in health care. These challenges will not be resolved overnight, but we need to embark on this journey as soon and as fast as possible.
I hope that the new year we are entering proves to be a better one than that upon which we have just closed the books.
Wishing you all a Happy New Year,
Bradley Britigan, MD, dean, UNMC College of Medicine