WALLINGFORD – Medicaid and Medicare rates are not keeping pace with the cost of care at Connecticut hospitals, increasing burdens and harming access for patients, according to a new report by the Connecticut Hospital Association (CHA).
Connecticut hospitals and health systems continue to face extraordinary financial pressures, exceeding national and regional challenges as healthcare providers across the country work to recover from the lasting effects of the global pandemic, according to the report states supported by an independent analysis from Kaufman Hall, a national healthcare economics firm. CHA and a panel of hospital executives discussed the report’s findings Wednesday during a virtual press conference.
“Compounding the cost and expense increases that we face is the significant underpayments from government payors,” said Dan DeBarba, CFO of Nuvance Health, which operates four hospitals in Connecticut. “All of you know we receive a significant amount of funding from Medicare and Medicaid for the care of those patients. Unfortunately, what we get paid is far short of the cost to provide that care.
“If you look across Connecticut, we’re paid almost $1.4 billion less than the cost to provide for those patients. From a Medicaid perspective, it’s more than $1.4 billion in shortfall when it comes to Medicaid patients.”
Jennifer Jackson, CEO of CHA, accentuated the need to address the rates of the federal insurance programs to help hospitals in the state pay for patient costs.
“A critical solution that needs to happen right away is addressing Medicaid rates,” she said. “We have a way to rectify it by utilizes federal funds and has significant benefits for our state overall by investments in communities. There are a lot of solutions that we have. But that is a critical one.”
Most of the rising expenses are related to operational costs, such as prescription drugs and supplies, and workforce costs exceed national growth and increases in the Northeast/Mid-Atlantic region, the report finds. Connecticut hospitals are collectively operating at a loss with a negative total operating margin, a critical indicator of hospitals’ financial health.
“We are raising awareness about these challenges ahead of the 2025 Legislative Session to inform our continued collaboration with state leaders and partners to ensure a sustainable and viable health care delivery system for our state’s future,” Jackson said. “Connecticut leads the nation in healthcare. But many of our challenges also exceed national challenges. More must be done to preserve the world-class, compassionate, accessible care for which Connecticut is known.
“Policymakers understand the importance of a sustainable and strong healthcare system, and we need to confront these realities head on to develop the right solutions for all patients and communities.”
Key findings from the report include the following.
Hospital expenses are rising at rates that exceed national and regional trends. In one year, from FY2022 to FY2023, in Connecticut:
- Operating expenses grew by 6.5% (an increase of $1 billion), exceeding the national growth rate of 4.5% and Northeast/Mid-Atlantic growth rate of 5.2%
- Workforce expenses grew by 4.4% ($169 million), exceeding the national growth rate of 1.8% and Northeast/Mid-Atlantic growth rate of 2.9%
- Drug costs grew by 10% ($249 million), exceeding the national growth rate of 6% and Northeast/Mid-Atlantic growth rate of 9%
- Medical supplies costs grew by 6.8% ($92 million), matching the national growth rate and exceeding the Northeast/Mid-Atlantic growth rate of 6.4%
Connecticut hospitals produced a total operating margin of -0.5% in FY 2023, lagging the Northeast/Mid-Atlantic margin of 2.2% and national margin of 2.6%. This is at a time when national margins are already historically low and hover at unsustainable levels. Total Connecticut hospital loss from operations was $76 million in FY 2023
Connecticut’s hospital operating revenue growth lagged the Northeast/Mid-Atlantic and the nation in part due to rising governmental payor mix. Governmental payments have not kept pace with the cost of care.
In FY 2023 hospitals and health systems in Connecticut experienced $1.38 billion in Medicare losses and $1.43 billion in Medicaid losses.
Medicaid payments average 62 cents on the dollar, and Medicare payments average 74 cents on the dollar, according to OHS’s September 2023 report.
“Financial challenges are a real and persistent challenge to the sustainability of Connecticut hospitals, the nearly 260,000 jobs they support, and the high-level of care they provide that all patients deserve,” Jackson said.
Read the CHA Report: Connecticut Hospitals Face Continued Financial Challenges, December 2024. Download the Kaufman Hall Independent Analysis
