Michigan’s healthcare industry is seeking a bailout as financial pressures grow and hospital beds continue to fill with children suffering from the respiratory syncytial virus, or RSV.
The Michigan Health and Hospital Association is pursuing unallocated American Rescue Plan Act funds and an allocation from the state general fund to stabilize the industry, John Karasinski, director of communications for the Lansing industry group, told Crain’s in an email.
The state is sitting on $750 million in unallocated ARPA funding and about a $3 billion budget surplus in the general fund.
“We are pursuing potential additional funding through the state legislature to continue to address these needs, particularly when our children’s hospitals are stressed to capacity due to limited staffing and a surge of children visiting the emergency department with respiratory illnesses,” Karasinski said in an emailed statement.
Hospitals are facing a massive surge in RSV among young children and are running out of beds for them.
On Thursday, the University of Michigan’s C.S. Mott Children’s Hospital in Ann Arbor sent out a statement urging parents to speak with their child’s primary care physician before taking them to the emergency room. The hospital said its pediatric beds were 100 percent full, with a 46 percent increase in RSV cases being treated over 2021.
The surge has left children in the emergency department for non-RSV-related problems waiting for “several hours,” the hospital said in a news release.
Two weeks ago, Corewell Health East, formerly Beaumont Health, said it was also nearly out of pediatric beds across its eight hospitals. The system was quickly transferring adult intensive care unit beds to be used by children with RSV.
“Many health systems across the nation would benefit from receiving ARPA funding to help offset industry-wide financial challenges created by the pandemic, labor pressures and inflation,” a spokesperson for Corewell Health East said in an email. “We are working with the MHA and other health systems to explore opportunities to receive ARPA funds.”
But hospitals’ financial problems predate the latest virus outbreak and seemingly are getting worse.
Hospital operating costs have climbed 10 percent year-to-date — inflation and labor costs are largely to blame — chewing up the typically low margins the healthcare industry generates. The median margin for hospitals through July this year is nearly negative 1 percent, according to a recent analysis by consulting firm Kaufman Hall. That pain reverberates through the entire nearly $1 trillion industry in the U.S. In Michigan, the sector is simply struggling to remain solvent while also maintaining all the healthcare services patients require.
The government has already interceded with funding this year. In February, Gov. Gretchen Whitmer signed Public Act 9 into law, which provided $300 million to the industry, including $225 million for hospitals and health systems to recruit, train and retain talent amid an industry-wide labor shortage.
Roughly 31,000 healthcare workers received retention bonuses from that round of funding, Karasinski said.
Most of Michigan’s hospitals also received federal funding during the COVID-19 pandemic in 2020. But the industry remains in dire financial straits with losses mounting.
“Our members have been very appreciative of the funding, but it accounted for just a small portion of the increase in expenses related to contract labor and recruitment and retention compared to 2020,” Karasinksi said in the statement. “Meanwhile, inflation continues to increase additional costs while stagnant reimbursement from government and commercial payers is causing additional financial distress.”
In 2021, Henry Ford Health reported an operating loss of $168 million, or a negative 2.5 percent operating margin, on net patient revenue of $4.2 billion. Corewell East reported a $100 million loss and Sparrow Health in Lansing reported a $90 million loss during the first six months of 2022.
Crain’s Detroit Business political reporter David Eggert contributed to this report.
This story first appeared in our sister publication, Crain’s Detroit Business.