Hospital association points to insurers for ongoing financial woes post-COVID

Your local hospital is feeling the pain of financial stress due to health insurers' policies at a precarious time, according to speakers at a Connecticut Hospital Association event on Wednesday.

"The commercial payer practices have become very, very challenging," said Dan DeBarba, chief financial officer at Danbury-based Nuvance Health. "In essence, payers do nearly anything they can with any reason to not pay us."

Nuvance officials have cited mounting financial losses in recent years as a key driver in a pending bid to merge with New York-based Northwell Health.

DeBarba spoke at the press event announcing a new report from health care economics analyst Kaufman Hall about the state of Connecticut's hospitals. Insurer policies, nurse shortages and inflation are making financial pressures worse in an area that's still acute in the wake of the COVID-19 pandemic, hospital executives who attended said.

According to the report, the state's hospitals are underperforming facilities in other New England states and the nation in terms of operating margins, a key measure of financial stability. The mean hospital operating margin for Connecticut remained negative for the second straight year in fiscal 2023 at -0.5%, compared to a margin of 2.2% for the Northeast/Mid-Atlantic region, and a national margin of 2.6%.

Connecticut hospitals reported higher expenses in 2023 in part due to the state's tight labor market and high utility costs, according to the report.

The troubled financial picture for state hospitals could translate into more hospital consolidation in Connecticut and fewer resources to invest in patient care and services, hospital officials said at the event.

"Fundamentally, this is about the strength of hospitals, which is about the strength of our state," Connecticut Hospital Association CEO Jennifer Jackson said, adding that health care companies are the state's largest employers. "When we are threatened financially, it impacts our ability to continue those investments."

"There's no question that hospital financing is extremely complicated," said Susan Halpin, a spokesperson for the Connecticut Association of Health Plans, who responded in a statement after the hospital association event.

"We understand that workforce challenges are real and that low reimbursement under Medicaid puts enormous pressure on the system," Halpin said. "We all need to work together to address deficiencies in the system."

Tighter rules on prior authorization, in which insurers seek to approve care in advance, "inhibit timely care" and drive up costs, DeBarba said.

"It's putting us through administrative hoops to get our patients out of the hospital and into the next venue of care, often making that very difficult for us to do," DeBarba said.

"I want to be careful here and not completely trash the industry," DeBarba said of insurers. "But it is without a doubt that payers are part of the problem here as it relates to our net profitability or lack thereof. They could be much better partners in caring for the patients."

Tougher insurer policies are colliding with Connecticut hospitals' need to charge more to commercial payers as state reimbursements continue to lag for government programs like Medicaid, Jackson said.

"A critical solution that needs to happen right away is adjusting the Medicaid rates," Jackson said. "There are a lot of solutions that we have that we certainly want to talk about, but that's a critical one that needs to happen right away."

State lawmakers advanced a bill to raise Medicaid rates in the last legislative session, but action has been put off until next year due to budget concerns, legislators said at the time.

Higher prices and shortages of key medical supplies like IV bags are blowing up costs for Connecticut hospitals, said Caryl Ryan, chief operating officer at UConn John Dempsey Hospital in Farmington. "The increases have just been incredible," Ryan said of the cost.

Medical supply prices are likely to get even higher if East Coast dock workers strike in the new year, Ryan added. Any strike in the supply chain "could prove disastrous for our health care institutions," he said.