By James C. Sherlock
I have written for years about Virginia hospitals and their state oversight, including Virginia’s monopolistic Certificate of Public Need (COPN) law and its administration by the Department of Health.
Virginia hospitals, and indeed those across the nation, are now under more stress than in generations.
Hospitals nationally are under financial pressures while public views of hospital finances are opaque and out of date.
Increasing shortages of qualified medical personnel are both driving up costs and challenging services in all of Virginia’s hospitals. The worst shortages are where you think they are. In hospitals serving poorer populations.
One study quoted by Oracle
…projects that if US workforce trends continue, more than 6.5 million healthcare professionals will permanently leave their positions by 2026, while only 1.9 million will step in to replace them, leaving a national industry shortage of more than 4 million workers.
That Oracle article is worth a read.
We will see increasing cutbacks of hospital services in Virginia. Some may find themselves unable to maintain some or all of their inpatient services.
A few may close.
I interviewed Virginia’s Secretary of Health and Human Resources on this front-burner situation.
Youngkin Administration Views. John Littel, Virginia’s Secretary of Health and Human Resources, was kind enough to communicate with me on this subject.
He is unable by policy to speak about the financial condition of hospitals other than to say that the system is still readjusting to the shocks of Covid.
His comment on the labor front:
Labor shortages are impacting both finances and operations of hospitals. Sometimes these systems can make adjustments, but more often than not the consumer feels the impact.
For more than a decade, we have been discussing looming labor shortages in health care. The pandemic may have expedited and in many places exacerbated the situation, but it will get much worse in the next decade.
It is and will be especially bad for mental health.
While not as much has been done as should have, both the state and the private sector are making some strides, particularly as it relates to nursing.
The Governor included in the budget a number of provisions for loan repayment increases, expanded preceptor programs and earn-to-learn for nurses. This has been bipartisan and the legislature has added where appropriate.
The private sector is not waiting for the government to solve it. The Virginia Hospital Association has made this a priority. HCA, for example, was so concerned that they bought their own national nursing school. HCA’s state of the art facilities in Richmond are generating nurses, who no surprise are choosing to work for HCA.
We will still need a wider industry focus and greater collaboration to get more people into every field of health care.
Financial data. Virginia’s not-for-profit hospitals, due in part to the COPN effect, have been far more profitable than the average hospital nationally for decades, including every year I have reported on the matter for the last 15.
But the source of relatively recent and complete financial data on Virginia’s hospitals has dried up. That has been the spreadsheet Hospital Operating and Total Margins produced by the state contractor for health data, Virginia Health Information (vhi.org).
Those data have aged to a point that they are useless. The latest version is for FYE 2020.
The biggest non-profit regional monopolies – Sentara and Inova – have the financial strength to continue to operate as before.
Among the for-profits, HCA is the best-managed hospital system in the United States.
HCA’s Virginia hospitals and their parent have been profitable in good times and bad, even though, unlike their non-profit Virginia competitors, HCA Virginia hospitals pay enormous state and local taxes. HCA stock is near all-time highs.
The smaller hospital groups and the independents – Bath County Community, Augusta Health, Buchanan General and Chesapeake Regional – will have to navigate troubled financial waters very skillfully.
Financial concerns. Kaufman Hall’s National Hospital Flash Report from December of 2022 shows very concerning trends, but does not single out Virginia or Virginia hospitals in its data.
America’s fourth largest health system, 139-hospital Ascension based in St. Louis, just reported a -2.9% operating margin for the six months ending Dec. 31, 2022. In addition to its operating losses, Ascension also lost $800 million in investments during that same 6-month period.
Revenue cycle issues are increasing for hospitals nationwide. Becker’s Hospital Review reports that labor shortages are “decimating revenue cycle teams, 84% of hospitals are behind on cash collections and denials are up.”
For those new to Virginia medical care, you might notice that Sentara is a member of both the VHHA and, through its Optima Health subsidiary, of VAHP. It thus sits on both sides of the table negotiating what you will pay to Sentara.
Optima sits across the negotiating table from Sentara’s hospital competitors. Sentara hospitals in their monopoly position sit across the table from Optima’s competitors.
Sweet – at least for Sentara.
Personnel shortages. Virginia has 80 general hospitals serving adults and children, two children-only facilities, and 24 specialized hospitals.
Hospital worker shortages are reflected by 11,209 job vacancies posted on the VHHA site among roughly 125,000 jobs in Virginia hospitals. That nine percent overall vacancy rate, higher in medical than administrative positions, is not good news for patients.
Virginia hospital vacancies include 4,259 nurses, 258 advanced practice nurses, 44 physician assistants, 2,533 allied health (health techs), 1,166 nursing support, 776 therapists, 240 pharmacists, 99 RN interns, 166 physicians, 259 mental/behavioral health professionals.
That is 9,800 Virginia vacancies in the healthcare occupational groups out of the total of 11,209 jobs, or 87% of hospital vacancies. Nationwide 68% of hospital jobs are in occupations in the healthcare occupational groups.
That means the vacancy rate in the healthcare operational groups in Virginia hospitals is nearly 12%. And those vacancies are not evenly distributed among hospitals or occupational groups and sub-groups.
One of the major issues is who will teach at the nursing schools.
That is a foundational problem that I have written about before. Those positions will have to see significant pay raises, which I suspect HCA has made in its new facility. Virginia’s colleges and universities, including community colleges, with nursing programs will have to make the expenditures.
Lastly, labor shortages raise questions about the ability and mission of the Virginia Department of Health to monitor and regulate the quality of services. For example, VDH will need to weigh in on whether hospital x needs to temporarily shut down one of its services due to lack of skilled personnel.
All of those vacancies are, perversely, good for the short-term operating margins of the hospitals if they can keep all of their services open. Except that when they are filled, the price in a labor shortage market is increasing.
As an aside, hospital health professionals are not even the leading current shortage.
Home health workers are.
Bottom line. I am not worried about Sentara’s financial condition or HCA’s. I am comfortable about Inova as well. It has two superior boards and excellent management as well as its monopoly position in Northern Virginia.
It is the smaller systems that are of financial concern, both in cash flows and the value of their investments.
As for the medical personnel shortages, it is clear that some reduction in services offered will be necessary. Every hospital in America is in the same bidding war, as are the ambulatory surgical centers, physicians practices, nursing homes, professional schools, K-12 schools and governments themselves.
The hardest hit will be the smaller players, those with poor management and those with little financial cushion.
We must rely upon the Virginia Department of Health and Board of Health to monitor and oversee the safety of our hospital system to protect the citizens. Those have not been strengths of Virginia government in the past.
The Virginia Senate in a very consequential near-party-line vote failed to confirm (fired) the last Health Commissioner, so that Department is without an appointed leader.
The Health Commissioner post is critical, very challenging, and it takes time to get a grip on that huge and far-flung Department.
Senate Democrats (without Joe Morrisey but with Amanda Chase) presumably considered that when they fired Colin Greene. Or not.
Replacing him will be made much harder by the circumstances of his leaving.
And VDH continues to have a very short-staffed inspection division. Staffed (or rather unstaffed) with nurses.
Secretary Littel and whoever fills the Health Commissioner post will have to try to fill somehow the unfilled inspector positions to provide oversight to the safety of our hospital system.