Hospitals at Risk of Closing; Nursing Union Ignores the Facts

Approximately 30 hospitals a year across the U.S. are closing, according to a national study that is resonating in Massachusetts as hospitals here, grappling with thin operating margins, face $1.3 billion in additional costs through the Question 1 ballot in November.

A recent Bloomberg report focused on a study Morgan Stanley analysts performed using American Hospital Association data. Of the roughly 6,000 hospitals across the U.S., Morgan Stanley determined 8% are at risk of closing, and 10% are considered “weak” in terms of their margins, occupancy, and revenue.

In Massachusetts last week, the Massachusetts Nurses Association attempted to paint a much rosier hospital financials picture than is warranted by the data. The MNA argued that Bay State hospitals can easily absorb the cost of ratios. But those costs – totaling $1 billion annually (including costs to the state), as determined by the Mass Insight Global Partnerships and BW Research Partnership – would hobble the Massachusetts healthcare system.

A subsequent report from the Massachusetts Association of Behavioral Health Systems (MABHS) determined that if the ballot question passes, and if behavioral health facilities are unable to recruit the additional RNs required to meet the Question 1 ratio mandate, they will be forced to reduce their patient volume by up to 38%, which is equivalent to removing roughly 1,000 behavioral health beds from service. MABHS Executive Director David Matteodo said passage of the ballot question would threaten the viability of many facilities and require some to close.

A recent report by the state’s Center for Health Information & Analysis (CHIA) found that 19 of 62 hospitals that reported – or 31% – had negative operating margins. The statewide median acute care hospital margin was just 1.6% – plummeting from 2.8% in FY2016 for the same set of hospitals. A hospital’s operating margin reflects the difference between its revenues and expenses from patient care. An operating margin of less than 3% is generally considered financially unhealthy by the lending agencies, meaning the cost of borrowing increases.  And more than one-fifth of hospitals in Massachusetts reported negative total margins.

And yet, the MNA disinformation campaign continues. WBUR quoted MNA spokeswoman Kate Norton as saying about California, the only state with mandated ratios, "The reality is that no hospitals — not a single one — closed as a result of safe patient limits. California healthcare costs and spending fall far below both the national and Massachusetts averages."

The data shows, however, that California experienced a sharp increase in hospital closures in the years around the implementation of its mandated nurse staffing ratios, and at least one of those closures has been attributed directly to the ratios. Other reputable studies have documented that California hospitals, as a result of ratios, did make cuts to programs and services and decreased the amount of uncompensated care that some hospitals provided. The proposed Massachusetts law is also more stringent than the California law and more punitive with $25,000 per-violation, per-day penalties.

As for healthcare costs, according to the Massachusetts Health Policy Commission, between 2009 and 2014, Massachusetts healthcare spending grew at the 4th lowest rate in the US, while California healthcare spending grew at the 10th highest rate.  Massachusetts has the lowest rate of uninsured in the U.S. while California has a much higher rate of uninsured, which contributes to gaps in spending.