Citing “inflation, record-high operating costs, and lower volumes,” a new report released this month says 38% of Kentucky’s hospitals are at risk of closure thanks to “the unsustainability of operations.”

Health-care consulting firm Kaufman Hall prepared the report at the request of the Kentucky Hospital Association.

The report shows that the state’s hospitals spent much more on medical supplies since the start of the pandemic than before it, suffered from staffing shortages, saw fewer people in emergency departments and more.

“Kentucky hospitals continue to face existential financial and operational threats,” Erik Swanson, the senior vice president of data and analytics at Kaufman Hall, said in a statement. “In 2022, Kentucky hospitals experienced their worst financial performance since the outset of the pandemic, and conditions in 2023 remain extremely challenging.”

Kentucky hospital expenses in 2022, the report says, were $4.2 billion higher than before the pandemic — and they surpassed revenue.

“Hospitals are the heart of the communities they serve, providing high-quality, life-saving care to anyone who needs it regardless of their ability to pay,” Kentucky Hospital Association president and chief executive officer Nancy Galvagni said in a statement. “They are also some of the largest employers in towns across the state, so the financial health of hospitals is critical to both the physical and economic health of Kentucky.”

Already, 42 of Kentucky’s 120 counties do not have a hospital, excluding those facilities inside correctional institutions, a KHA spokeswoman told the Lantern. That comes out to about 35% of the state’s counties.

“Rising costs are making it difficult for our members to stay open,” Galvagni said. “Labor costs, in addition to the extreme growth in costs for supplies and drugs our patients need, which are struggles all Kentuckians understand, are outpacing growth in revenue.”

KHA said that without the Hospital Rate Improvement Program in place last year, “losses would have exceeded $1.3 billion and operating margins would have fallen even more.”

House Bill 75?

Because of the financial situation facing Kentucky’s hospitals, Galvagni spoke in support of House Bill 75, which passed the Senate Standing Committee on Health Services on March 8.

Primary sponsor Rep. Brandon Reed, R-Hodgenville, told his colleagues that the bill is “aimed at improving access to the quality (of) health care for each and every Kentucky as well as serving as a lifeline to rural hospitals serving communities throughout the commonwealth.”

HB 75, which also has bipartisan support, would allow hospitals to be Medicaid-reimbursed for outpatient services as well as inpatient.

“The timing is very critical for this and we really need it to sustain our hospitals,” Galvani told the committee, adding that there is no “relief in sight for these high costs that are out there.”

The bill, Galvani said, is especially critical for rural hospitals, as the majority of dollars coming in for the outpatient side will go to them and they “desperately need it.?