‘One of the most financially challenging years for Arizona hospitals’—AzHHA third quarter analysis details ongoing hospital financial challenges

The Arizona Hospital and Healthcare Association’s (AzHHA) third quarter financial analysis, compiling data from 29 AzHHA member hospitals, reveals that Arizona hospitals continue to face significant financial challenges in 2022. 

 

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AzHHA’s latest quarterly hospital financial analysis shows that operating margins remained negative in all 3 quarters of 2022, despite slight improvements seen in the third quarter. 

In the first quarter of 2022, operating margins decreased to 4.6%. The margins decreased to 5.7% in the second quarter, and slightly increased to 4.9% in the third quarter.

The chart below shows the net operating margin over the course of the past year.

 

Image: Arizona Hospital and Healthcare Association

 

AzHHA notes that this trend can be attributed to large increases in hospital expenses, a significant decrease in COVID-19 relief funds, and hospitals repaying their Medicare Accelerated and Advance Payments they began to receive toward the beginning of the pandemic.

The analysis also notes that AzHHA hospital data remains consistent with federal level data. 

AzHHA states that workforce issues continue to be a top priority for every member hospital, with wages continuing to increase in order to retain staff. The analysis cites that all state hospitals reported an average 15% increase for salaries and wages from 2020 to 2021. 

The analysis goes on to state that salaries and wages have increased by an average of 8% in the first and second quarters and 4% in the third quarter of 2022.

According to the Chief Financial Officer of an unnamed member hospital, key clinical positions remain unfilled with up to 30% wage rate increases.

“Additionally, there are key professional positions that seem to be nearly impossible to fill at any price [with] offers at the 75th percentile, and the positions continue to go unfilled,” reads the quote by the member CFO.

According to AzHHA, contract labor declined in the third quarter of 2022 from the previous quarter, while still increasing by 88% from the previous year.

The chart below shows the trend of Arizona hospital payments for contract labor.

 

Image: Arizona Hospital and Healthcare Association

 

Ann-Marie Alameddin, President and CEO of AzHHA, emphasized the ongoing financial burden faced by Arizona hospitals in a statement. 

“This year continues to be one of the most financially challenging years for Arizona hospitals,” she said. “Challenges continue in the form of workforce shortages, continued inflation and supply chain shortages.”

In response to the financial analysis from the first and second quarters of 2022, Alameddin highlighted the potential impacts of these ongoing financial challenges on patient access to care in the state.

“Payments from public payers and commercial payers alike must account for the extraordinary strain on hospital and health system expenses in this post-COVID world,” Alameddin said. “Without this recognition, patients’ access to quality care is jeopardized.”