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Report: Alabama hospitals lost $1.5B during pandemic

Fifty percent of Alabama hospitals are operating in the red, despite recent federal COVID-19 relief funds, a new report says.

“Since the beginning of the pandemic, Alabama’s hospitals have lost $1.5 billion dollars, money they couldn’t afford to lose,” said Erik Swanson of Kaufman Hall, a health care consulting company that did the report for the Alabama Hospital Association.  

“The report clearly shows that Alabama’s hospitals are in serious financial difficulty, which creates a huge threat to the ability of Alabamians to have access to health care,” Swanson said.

The document doesn’t say which specific hospitals are in the red, but highlights issues across institutions.

Swanson said Alabama hospitals receive some of the lowest Medicare reimbursement rates in the nation and low rates from commercial insurers are a financial challenge.

Meanwhile, total expenses, including staffing and supplies, have increased more than 20% since before the pandemic. 

During a discussion Thursday, hospital association officials said so far in 2023, they’re not faring any better. While some hospitals are at risk of closing, others, including urban facilities, could have to cut services.

When Alabama lawmakers meet this spring, they’re expected to distribute more than $1 billion in American Rescue Plan Act money, the last of the federal COVID-19 relief money. Hospitals are hoping to get a significant portion of that money.

“There isn’t enough ARPA funding out there to plug the hole and make hospitals whole to pre-pandemic levels,” association President Dr. Don Williamson told reporters. “But what we desperately need is a significant infusion of ARPA funds, enough to serve as a bridge until we can address some of the other fundamental challenges in the reimbursement systems, whether that’s uncompensated care, whether that’s our Medicare issues. We need that bridge.”

The association said the report should serve as a warning for state leaders.

“A collapse of the system would have a ripple effect on the state’s economy as a whole,” said Joseph Marchant, CEO of Bibb Medical Center and chairman of the Alabama Hospital Association.  “There is not one area of our state and local economic infrastructure that doesn’t depend on hospitals and other healthcare providers.  In Bibb County, our hospital is one of the largest employers, and because of the hospital, our county has doctors, pharmacies, home health and other services.  We also help attract new businesses, support existing ones and contribute substantially to the local tax base.”

Other significant findings in the report said:

  • Without federal funds, the lost income for hospitals since 2019 would have been more than $2.4 billion. Instead, it was $1.5 billion.
  • Seventy-five percent of the increased labor costs for Alabama hospitals were due to increases in pay and benefits for existing staff, including hazard pay, retention bonuses and other compensations. About 25% of the increased labor costs were the result of increases for contract labor during the pandemic.
  • Costs have increased by $443 million for Alabama hospitals for medication and supplies since 2019.
  • Even though COVID has become less disruptive, hospital capacity remains a challenge due to greater patient needs and staffing shortages.


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