More Texas hospitals facing closure as financial pressures mount

John Hawkins, president and CEO, Texas Hospital Association

Texas hospitals are facing mounting financial pressures, and a new report says almost one in 10 hospitals in the Lone Star State are at risk of closure.

The Texas Hospital Association commissioned an analysis of the state’s hospitals from Kaufman Hall, the healthcare consulting firm. While the Texas economy is surging and the state’s population is growing, the state’s hospitals aren’t faring as well financially, said John Hawkins, president and CEO of the Texas Hospital Association.

“The key takeaway: Hospitals face an existential operational and financial threat,” Hawkins said in a briefing with news reporters Wednesday.

The number of Texas hospitals at serious risk of shutting down has doubled during the COVID-19 pandemic, according to the Kaufman Hall analysis. The report states that 9.2% of Texas hospitals are facing a risk of closure, up from 4.7% in 2020.

Nearly half of Texas hospitals (47%) have suffered negative operating margins in 2022, meaning expenses are exceeding hospital revenues. In 2019, roughly one-third (33.9%) of the state’s hospitals were in the red.

‘Pervasive workforce shortages’

Like hospitals around the country, Texas hospitals are struggling with higher expenses. Texas’s hospital expenses have risen 20% since the pandemic. Total expenses for Texas hospitals in 2022 were $33.2 billion higher than pre-pandemic levels, according to the Kaufman Hall report.

Much of those higher costs are due to increased labor expenses. Hospitals in Texas, and around the country, are seeing a shortage of nurses. Hospitals also need more laboratory technicians and phlebotomists, Hawkins said.

Texas hospitals are also spending far more on contract labor than before the pandemic. In 2022, Texas hospitals spent $4.9 billion on contract labor, up from $100 million in 2020.

“The issue we’re struggling the most with now are pervasive workforce shortages,” Hawkins said.

Some workers have left due to the stresses of the COVID-19 pandemic. The rising violence aimed at hospital workers “has continued to impact our workforce shortage going forward,” Hawkins said.

Hawkins pointed to the fatal shooting of a nurse and a social worker at Methodist Dallas Medical Center, as well as the killing of four people at a medical building on the campus of the Saint Francis Health System in Tulsa, Okla. in June. Two doctors, a receptionist and a patient were killed in that shooting. The fatal shootings in Texas and Oklahoma weigh on healthcare workers and make recruiting employees, including workers, more difficult.

“The incidents we’ve seen in Tulsa and Dallas don’t necessarily help with that,” he said.

Risks of closure, cutting services

While hospitals across Texas are struggling, rural hospitals face especially trying times, and they are the most threatened, Hawkins said.

“The closure risk is more real for rural hospitals,” he said.

Hospitals in urban areas in Texas are less likely to close, Hawkins said. However, even some urban hospitals could be forced to cut back on some services without more assistance, he said.

Some hospitals in Texas have cut back on pediatric services, and that has had an impact on pediatric hospitals, particularly as they are seeing an influx of patients with RSV and other respiratory viruses, Hawkins said.

“That's more of a double whammy for pediatric hospitals,” Hawkins said.

Hospitals are also keeping patients for longer periods, and the average length-of-stay is rising in Texas hospitals.

“The patients that we are seeing are sicker,” Hawkins said. He said, “That’s not surprising with care likely delayed during the pandemic.” Nationwide, hospitals have seen patients with more advanced cancers and other diseases, partly because they didn’t get screenings or other care during the pandemic, healthcare leaders have said.

Hospitals are also keeping patients for longer stays even when those patients are healthy enough to leave. Hospitals in Texas (and elsewhere) are often struggling to transfer patients that are ready to be discharged, because of a lack of beds or staffing at nursing homes, rehabilitation centers or other long-term care facilities.

“Those folks in effect are boarding in our hospitals,” Hawkins said, adding, “Just because someone is boarding in our hospitals doesn’t mean we’re getting paid for it.”

Texas hospitals are also keeping a number of patients with mental health issues due to a lack of beds available in psychiatric facilities. “Behavioral health patients are boarding in our hospitals as well,” Hawkins said.

The Texas Hospital Association commissioned the report to help make a case to Congress and Texas state legislators for more aid. The Texas state legislative session begins in January 2023 and ends in May. The Texas legislature meets once for 140 days every two years. When the 2023 session ends, Texas state lawmakers aren’t scheduled to reconvene until January 2025.

Texas health systems are looking for more state and federal support “to make sure hospitals stay open,” Hawkins said.

On the federal level, hospitals are bracing for the possibilities of cuts in Medicare that are slated to take effect in 2023, unless Congress intervenes. Medicare is slated for a 4% cut under the Pay-As-You-Go (PAYGO) sequester, which is designed to ensure that federal spending doesn’t add to the deficit.

Hospitals have been urging Congress and President Biden’s administration to hold off on that reduction, which would hurt health systems, hospitals, medical groups, physicians, and home health agencies.

“A 4% cut to them wouldn’t be helpful,” Hawkins said.

Hawkins said he hopes the report on the state of Texas’ hospitals is a wake-up call to state and federal officials.

“It's making sure we can provide patient care,” Hawkins said.