MN Hospitals Continue Bleed Cash: Risings Labor, Medical Costs Blamed

ST. PAUL, MN — A new Minnesota Hospital Association (MHA) analysis of hospital and health system finances shows losses growing at many of the state’s major healthcare providers.

Ongoing financial losses nearly tripled in some cases, according to the survey.

According to the study, 67 percent of hospitals and health systems in the MHA analysis were losing money. That number is up 55 percent from 2022.

The plunge in operating margins is in part being blamed on the costs of labor — which grew by 7 percent in the last year — and the inflated costs of supplies and services.

Nearly a quarter of MHA hospitals reported labor costs rising by double-digit percentage points, and a third of hospitals said supply and service costs had risen by more than 10 percent over 2022, according to the study.

Also being blamed for the financial strain is the rise in Medicare and Medicaid patients. Both of those programs reimburse providers well below the actual cost of providing care, industry officials said.

They routinely underpay an estimated 27 percent below the true cost of Medicaid, and 20 percent below the true cost for Medicare, according to MHA.

"Workforce shortages, cuts in the federal 340B Drug Pricing Program, persistent delays in discharging patients to step-down care, and a crisis in behavioral and mental health care are adding to the grave financial challenges hospitals and health systems are facing," MHA President Rahul Koranne said in a statement.

Similar financial pressures have closed programs and cut care at more than 50 hospitals across the country already in 2023 and hundreds more could follow, the MHA warns, adding that nearly 30 percent of the nation's rural hospitals are facing closure.