Third-quarter data reveals workforce shortages, inflation and supply chain woes

PHOENIX — The Arizona Hospital and Healthcare Association Thursday released its latest quarterly hospital financial analysis showing continued challenges for Arizona hospital finances.

The AzHHA Quarterly Financial Analysis for third quarter (Q3) 2022 financials compiles data from 29 AzHHA member hospitals. While operating margins improved slightly in the third quarter of 2022, AzHHA member hospitals report negative operating margins in all three quarters in 2022. Hospital operating margins fell to (4.6)% in the first quarter, further decreased to (5.7)% in the second quarter and were (4.9)% in the third quarter.

“This year continues to be one of the most financially challenging years for Arizona hospitals,” said Ann-Marie Alameddin, president and CEO of AzHHA. “As one example, the payments for contract labor increased by 88% compared to payments made last year. And challenges continue in the form of workforce shortages, continued inflation and supply chain shortages.”

The numbers, at a glance:

• In the 2021 Uniform Accounting Reports, all Arizona hospitals reported an average 15% increase for salaries and wages from 2020 to 2021. AzHHA hospitals report some slowing in 2022 with growth averaging 8% in Q1 and Q2 over the prior year and 4% in Q3.

• After four quarters of growth, contract labor finally saw a decline in 2022 Q3 from the prior quarter. Nevertheless, contract labor still increased by 88% from one year prior.

• AzHHA hospital data continues to mirror what is happening at the federal level. While hospitals, on average, maintained healthy margins in 2021, 2022 has been a challenging year as increased expenses have eaten away at positive margins for a large number of hospitals.

• While 2022 has been troubling for many hospitals, 2022 Q3 was rather profitable for most of the nation’s largest health insurers. UnitedHealth Group and Elevance Health (formerly Anthem) yielded $5.3 billion and $1.6 billion in profits, respectively, or a 28% and 7% increase over the third quarter last year.

Looking ahead, there is a 4% statutory Medicare PAYGO sequester cuts will go into effect in January, reducing Medicare payments by $38 billion nationwide in 2023.

“Unless this is postponed by Congress, these cuts will further exacerbate an already critical situation,” said Alameddin.   

View the AzHHA Quarterly Financial Reports on our website: https://www.azhha.org/hot_topics.

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About the Arizona Hospital and Healthcare Association

AzHHA is the association giving Arizona hospitals a voice to collectively build better healthcare and health for Arizonans. As the champion for healthcare leadership in Arizona, AzHHA and its member hospitals explore ideas and take collaborative action at the state capitol, in hospitals and at home to attain the best healthcare outcomes for our community. Above all else, we put people and patients first through Better Care, Better Health and Lower Costs. Visit https://www.azhha.org for more information.