Wisconsin Hospital Association CEO discusses hospital closures and financial woes | States of healthcare

Two hospitals that had served patients in western Wisconsin since the late 1800s have closed their doors, and Eric Borgerding says he’s worried about the viability of other hospitals.

Borgerding, the president and CEO of the Wisconsin Hospital Association, says the closure of the hospitals should serve as a warning. Last week, The Hospital Sisters Health System shut down Sacred Heart Hospital in Eau Claire and St. Joseph’s Hospital in Chippewa Falls, as HSHS has pulled out of western Wisconsin.

“The news of these two outright closures is something that we really should not ignore, certainly in my state,” Borgerding says. “Because I think it's probably an acute sort of example of some of the pressures that are there across the industry right now.”

They represent the first hospital closures in Wisconsin in more than a decade, he says. But he’s also worried that some other hospitals in Wisconsin could also end up closing their doors due to financial difficulties.

In an interview with Chief Healthcare Executive®, Borgerding discusses the closure of the two hospitals, the challenges for other providers in Wisconsin, and the difficulties in recruiting healthcare workers in a state with an aging population.

(See part of our conversation with Eric Borgerding in this video. The story continues below.)

The closures and the impact

The two hospitals that shut their doors were not large hospitals, but these weren’t small critical access hospitals with just a handful of beds.

Sacred Heart Hospital had 192 beds and served Eau Claire, a city with about 70,000 residents. St. Joseph’s Hospital had about 100 beds. HSHS, a faith-based system operating 13 hospitals and a host of physician practices in Illinois and Wisconsin, cited a number of financial issues in the closure, including workforce challenges and difficulties matching supply and demand in the market.

Borgerding says the closures is “a shock” to the region, since it means the loss of in-patient capacity and other critical services provided by the hospitals. But he also acknowledges the steep financial difficulties both hospitals were facing.

HSHS initially agreed to take $15 million in state funding to provide additional mental health services in the Eau Claire region, but opted against accepting the money, Borgerding notes.

“Even with the $15 million in one-time funding, they could not afford to operate the services there,” he says. “They just couldn't do it. Their margins were plummeting.”

Looking back, Borgerding says that was one of the “warning signs” of the perilous finances of the HSHS hospitals.

Nonprofit hospitals in the Eau Claire area had negative margins in the double digits in 2022, he says. Plus, two-thirds of the patients in the region rely on Medicare and Medicaid, creating more financial headwinds for hospitals. The commercial payer mix in the area is declining, he says.

The closure of the two hospitals reduces acute care and emergency care options, but it also deals a critical blow to mental health services in the region, Borgerding says.

“When HSHS closed those two hospitals, they closed a significant amount of the region's mental health and substance use disorder care that was available,” he says. “That continues to be a major problem.”

Fearing other closures

While Borgerding says the closures were the first hospitals to shut down in Wisconsin in years, he worries that others could be forced to close in the near future.

When noting that it had been more than a decade since Wisconsin lost a hospital, he says it may not be as long before others go down.

Borgerding doesn’t name any hospitals or systems that he’s specifically worried about. But he notes that others are struggling with higher costs and inadequate reimbursements, which are exacerbated in a state with an aging populace where patients need more services.

The Marshfield Clinic Health System furloughed about 3% of its staff in January, just two weeks after announcing that its planned merger with Essentia Health wouldn’t be happening. Marshfield, which is based in Wisconsin and also serves part of Michigan,

operates 11 hospitals and scores of other clinics and outpatient locations.

By 2040, Wisconsin’s population of residents 65 and over is likely to be twice as high as it was in 2010, Borgerding says. Those older patients are going to need more services.

Wisconsin’s population growth has been essentially flat since 2020, according to estimates by the U.S. Census Bureau.

The hospital association is working on initiatives to bolster the healthcare workforce, such as licensure reform.

“Those kinds of things … are important, but, in and of themselves, don't bring more people into the state, young people into the state of Wisconsin,” he says. “They really just, theoretically better utilize the workforce that we have.”

Some hospitals have been forced to drop services, such as labor and delivery or some behavioral health. Borgerding says that hasn’t been limited to small, rural hospitals, and he says the reduction of services hasn’t been driven by a lack of demand.

“They simply can't operate it anymore,” he says.

Some hopeful signs

For Wisconsin hospitals, like hospitals around the country, 2022 proved to be a calamitous year.

“I'll tell you 2022 was the worst year financially I've seen in my tenure, my 22 years at the Wisconsin Hospital Association,” Borgerding says. “We had dozens of hospitals operating literally in the red.”

The final figures for 2023 aren’t in for all hospitals, but Borgerding says he expects to see some improvement.

“I do think in general, hospitals are looking better in ’23. But that's not across the board,” he says.

Wisconsin has seen a number of hospital consolidations in the past few years. Froedtert Health and ThedaCare finalized the merger of the two systems and joined force Jan. 1. Aspirus Health acquired seven Wisconsin hospitals from the Ascension system. Gundersen Health System and Bellin Health merged in late 2022. While there has been more consolidation, there hasn’t been a loss of competition in local markets, Borgerding says.

While staffing is a challenge, hospitals are relying less on contract nurses to fill vacancies, he says. Nursing school enrollments are rising, which indicates that there’s a bit more interest in healthcare careers. Borgerding also suggests that the passage of time since the peak of the COVID-19 pandemic has eased some concerns about working in nursing and other roles in hospitals.

“I think that dynamic is improving,” Borgerding says. “I just think there remains a fundamental challenge in a state like ours, where we just don't have the population growth that we need.”

Hospitals are facing more challenges in providing mental health services, especially as local governments are reducing their investments, Borgerding says. He points to four hospitals in the Milwaukee area that have partnered to help provide mental health services.

“Believe me, those aren't money-making investments,” Borgerding says. “They're losing money on that … but they had to do it.”

“So yes, behavioral health continues to be a real challenge,” he adds. “It's a reimbursement challenge. It's a workforce challenge. And it's a demand challenge.”