State lawmakers and health experts debate how to save PA hospitals

In the wake of this month’s Crozer Health system closure, which halved the number of Delaware County hospitals from four to two, a State Senate Institutional Sustainability and Innovation Committee hearing Wednesday focused on the challenges facing Pennsylvania’s troubled hospitals.

Regulatory burdens, low reimbursement rates, workforce shortages and rising costs were repeatedly cited by health experts as the culprits behind what Dr. Mark Rubino, president of Allegheny Health Network, called “a perfect storm of financial instability” for the state’s health systems.

“We are in crisis management,” said state Sen. Timothy Kearney, a Democrat from Delaware County. Referencing Crozer, he added: “Our county has lost its largest employer … The surrounding hospitals are being overwhelmed .... Multiple municipalities in the county have declared a state of emergency … It’s ugly. It’s tragic. And it can be prevented from happening in other communities in the commonwealth.”

Kearney noted that the phenomenon of for-profit firms taking over community hospitals – and eventually closing them – is not a simple problem of corporate greed. He explained that persistently low insurance reimbursement rates push financially stressed health systems into downward cycles of delayed maintenance, disinvestment and, eventually, insolvency that leaves little option beyond a private-equity takeover.

“The Wall Street vultures are a symptom of a larger illness within the hospital sector: the illness of financial malnourishment,” Kearney observed.

The health experts offered a series of potential solutions, including higher reimbursement rates from state programs like Medicaid and Medicare, which insure the majority of commonwealth hospital patients; a stable regulatory environment that facilitates long-range planning; and bipartisan legislation, currently under consideration in the state Senate, that would create a grant program to incentivize health workers to practice in rural communities.

Nicole Stallings, CEO of the Hospital and Healthsystem Association of Pennsylvania, said that behind the bankruptcy and closure headlines, many more hospitals are teetering on the financial brink. “They are one funding cut, one cyberattack (away) from having to make difficult decisions regarding services, or in the worst case, close their doors,” she said.

That tenuous balance was thrown into sharp relief by Steven Fontaine, CEO of Penn Highlands Healthcare, who told the gathering that his system has gone from a pre-pandemic operating margin of roughly 2% to negative 4% post-COVID – a shift he called “not sustainable.”

Rubino emphasized that rural regions face particularly steep challenges. 

“We’ve had decades of out-migration. We’ve had natural population decline with aging populations,” he said. “This shortfall places a disproportionate burden on hospitals serving rural and vulnerable communities, which is one reason so many hospitals have closed in Western Pennsylvania.” 

Another panelist, Dr. Ed Sabanegh, CEO of the Guthrie Clinic in Northern Pennsylvania, highlighted the fallout of those closures – a federal finding that the natural-cause mortality for working-age people in rural areas was 43% higher than for similar patients in urban settings. “Twenty years earlier, that gap was only 6%,” Sabanegh said.

Several panelists also emphasized the critical importance of hospitals not only for individuals, but for regions. 

“Having a strong hospital in a community is a prerequisite to economic development – and conversely, it’s easy to see how health care deserts very quickly become economic deserts,” said Stallings. “We cannot have healthy, vibrant communities in Pennsylvania without strong, viable, stable hospitals.”