Hospital association warns of widespread closures across Pennsylvania as margins turn negative

As many as 14 hospitals in Pennsylvania could sharply cut services or close outright if more isn’t done to shore up operating costs and reimbursement on the state level, the Hospital + Healthsystem Association of Pennsylvania warned in a report released Wednesday.

HAP, which is the trade association for the commonwealth’s hospitals, said in the report “Time to Act” that hospitals as a group are in a new normal with higher costs and lower reimbursement that includes about $1 billion in losses, or a negative 1% margin, due to expenses that aren’t made up by revenue. That’s without taking into account the cuts through last year’s federal spending bill in hospital payments through Medicaid and changes to eligibility for government health insurance that is expected to take a $2.4 billion impact, or -3% margin, HAP said.

The HAP report, which was done by Oliver Wyman LLC, said it’s not out of the realm of possibility that things could be even worse, with the statewide average margin falling to -11% and a cliff of about $7.4 billion. This would lead to more hospital closures or drastic cuts in service. There have been 25 hospital closures in Pennsylvania since 2016, including Ellwood City Hospital in southwestern Pennsylvania in late 2019.