Perilous Times: The Serious Financial Stress on Virginia Hospitals

The article in the August edition of FOCUS explores the financial challenges facing Virginia hospitals and health systems as a result of systemic factors such as growing charity care, declining Medicare and Medicaid reimbursements, and federal funding cuts. Even as health care providers face these external financial pressures, they must simultaneously meet costly new government-imposed obligations to convert to electronic medical records, develop more integrated care models, and make other significant operational changes.

Highlights of August’s FOCUS edition include:

  • Hospitals are a major employer in the Commonwealth directly responsible for 115,000 good-paying jobs with a combined payroll of nearly $8 billion. Hospitals generated roughly $36 billion in economic activity for Virginia in 2013.
  • Health care jobs were one of the few employment growth sectors in the Commonwealth last year – 1 in 9 jobs (11 percent of Virginia’s workforce) are in the industry.
  • Total health care-related jobs are an even larger slice of the economy. According to the Virginia Labor Market Index, direct and indirect health care-related jobs account for almost 950,000 of all Virginia jobs (approximately 23 percent of the workforce).
  • Virginia’s health systems are in the midst of an unprecedented transition. The metamorphosis is organizational and operational. It covers everything from the health care delivery model, to major investments for health information technology, clinical integration models to improve care coordination, protocol changes to achieve better health outcomes, and work to enhance value for those we serve. Unfortunately, this forward momentum is imperiled by political inertia producing status quo policies – namely a failure to find a pragmatic path forward on enabling more Virginians to access affordable health care and pay for health services rendered.
  • Affordable Care Act-related cuts to Virginia’s Medicare providers will grow to more than $675 million by federal fiscal year 2021.
  • At present, 74 percent of patients at Virginia’s rural hospitals and 60 percent at urban hospitals receive health coverage through Medicare or Medicaid, meaning hospitals receive pennies on the dollar for care provided to a majority of patients. And reimbursement rates for those programs are on a steady decline.
  • On average, 6 percent of patients do not pay their hospital charges. Last year, Virginia hospitals provided $627 million in free or discounted care, up 57 percent since 2008.
  • A financial forecast model developed in late 2014 projects that all Virginia hospital operating margins will decline. The challenge is even more acute for Virginia’s rural hospitals – their operating margins are forecast to reach zero percent by 2022.

Download the full report here