/ en Wed, 30 Apr 2025 07:53:33 -0500 Wed, 30 Apr 25 06:00:00 -0500 /costsofcaring <div class="container"><div class="row"><div class="col-md-8"><h2>Introduction</h2><p>America’s hospitals and health systems are the cornerstone of the nation’s health care system, providing life-saving care to millions of patients each year. However, hospitals face a perfect storm of financial pressures: persistent cost growth, inadequate reimbursement, and shifting care patterns driven by both policy changes and an older, sicker population with more complex, chronic conditions. Hospitals are struggling to maintain access to essential services amid workforce shortages, supply chain disruptions, tariffs and policy decisions that often fail to reflect on-the-ground realities.</p><p>This report outlines the key trends impacting hospital financial stability in 2025.</p><h2>Hospital Expenses Have Surged and Remain Elevated</h2><h3>Labor Costs Dominate Hospital Expenses</h3><p><img src="/sites/default/files/inline-images/Figure-1-Labor-spend-still-dominated-hospital-expenses-in-2024_0.png" data-entity-uuid="2549d942-1df8-4906-b89f-4b2a3e7b16c1" data-entity-type="file" alt="Figure 1. Labor spend still dominated hospital expenses in 2024. Labor: 56%; $890 billion. Other: 22%; $352 billion. Supplies: 13%; $202 billion. Drugs: 9%; $144 billion. Note: Average expenses estimated by industry benchmark data from Strata Decision Technology, LLC. Labor is inclusive of purchased services and professional fees." width="485" height="457" class="align-right">Hospitals are among the few sectors that consistently employ a highly educated, highly paid workforce — anchoring local economies with middle- and high-skill jobs that cannot be outsourced or automated. Consequently — and despite growth in drug spending and other fast-rising non-labor costs — labor remains the single largest category of hospital spending. Total compensation and related expenses now account for 56% of total hospital costs (see Figure 1). Amid ongoing workforce shortages, hospitals offer competitive wages to retain and recruit staff. According to AHA analysis of Lightcast data, advertised salaries for registered nurses have grown 26.6% faster than the rate of inflation over the past four years. These increases are essential to maintain staffing levels but also contribute to the overall financial challenges hospitals face.</p><h3>Medicare and Medicaid Reimbursements Are Not Keeping Up With the Cost of Caring</h3><p><img src="/sites/default/files/inline-images/Figure-2-Inflation-Overshadows-IPPS-Net-Payment-Increases-FY-2022-to-2024.png" data-entity-uuid="dcf8f08c-3781-4459-9678-f45197fbc0e9" data-entity-type="file" alt="Figure 2. Inflation Overshadows IPPS Net Payment Increases, FY 2022 to 2024. Inflation: 14.1%. IPPS increases: 5.1%. Note: Net IPPS payment increase from FY2022-2024 market basket updates. Inflation measured using CPI-U from BLS using data between October of 2021 and October of 2024." width="484" height="403" class="align-right">Despite escalating expenses, Medicare reimbursement continues to lag behind inflation — covering just 83 cents for every dollar spent by hospitals in 2023, resulting in over $100 billion in underpayments, according to AHA analysis of AHA Annual Survey data. From 2022 to 2024, general inflation rose by 14.1%, while Medicare net inpatient payment rates increased by only 5.1% — amounting to an effective payment cut over the past three years (see Figure 2).</p><p>The AHA estimates that this erosion in payment value due to inflation resulted in $8.4 billion in lost hospital revenue during that period, further straining hospitals’ ability to care for Medicare beneficiaries, who make up a large share of most hospitals’ patients. In total, hospitals absorbed $130 billion in underpayments from Medicare and Medicaid in 2023 alone. These shortfalls are worsening — growing on average 14% annually between 2019 and 2023.</p><h3>Hospital Expenses are Growing Faster Than Inflation</h3><p>Specifically, in 2024 alone, total hospital expense grew 5.1%, significantly outpacing the overall inflation rate of 2.9%. Though expense growth has started to slow in 2025, it remains elevated — particularly in areas driven by labor and supply chain pressures. Persistent expense growth threatens hospitals’ solvency and their ability to sustain comprehensive services in the communities they serve. A telling indicator of this strain is the average age of plant — a measure of the age of hospital infrastructure — which has risen by more than 10% over the last two years, according to industry benchmark data from Strata Decision Technology, LLC. This trend suggests that hospitals are increasingly unable to reinvest in critical physical assets, such as medical equipment, operating rooms and facility upgrades. Delayed capital improvements not only jeopardize care quality but also hinder hospitals’ ability to keep pace with evolving health care standards and technology.</p><h3>Impact of Chronic Disease Burden Costs Driven by Increased Utilization</h3><p>Rising hospital costs are increasingly driven by higher utilization and acuity, especially among patients with chronic conditions. According to the Centers for Medicare & Medicaid Services (CMS), recent growth in spending on hospitals reflects increased service intensity and use.<a href="#fn1"><sup>1</sup></a> For example, emergency department (ED) visits related to heart failure increased 126.7% per capita between 2010 and 2019 (see Figure 3), with associated spending growing 177.2%. Similar patterns are observed for type 2 diabetes and acute renal failure — some of the costliest conditions in terms of patient health and resource use. These trends underscore the demand-side pressures fueling cost growth.</p><img src="/sites/default/files/inline-images/Figure-3-Hospital-ED-Cost-Growth-for-Privately-Insurance-Patients-Driven-by-Increased-Utilization_0.png" data-entity-uuid="c82f1a54-9687-4310-8eb7-944970fa7b48" data-entity-type="file" alt="Figure 3. Hospital ED Cost Growth for Privately Insured Patients Driven by Increased Utilization. Heart Failure: 177.2% Total spending; 126.7% Encounters per capita. Acute renal failure: 56.5% Total spending; 50.0% Encounters per capita. Diabetes mellitus: 75.3% Total spending; 42.6% Encounters per capita. Note: AHA analysis of the data from the Institute of Health Metrics and Evaluation (IHME). Unitied States Health Care spending by Health Condition and County (2010-2019)." width="1039" height="423"><h2>The Growing Impact of Medicare Advantage on Hospital Finances</h2><h3>Observation Stays Are Increasing in Duration</h3><p><img src="/sites/default/files/inline-images/Figure-4-MA-Drives-Longer-Observation-Stays.png" data-entity-uuid="25bdfc97-fde8-4e32-be35-e8947ed26284" data-entity-type="file" alt="Figure 4. MA Drives Longer Observation Stays. Percent Longer MA Observation Stay Compared to Traditional Medicare. 2019: 28.6%. 2024: 36.9%. Note: Data from industry benchmark data from Strata Decision Technology, LLC." width="485" height="580" class="align-right">Medicare Advantage (MA) plans have long relied on extended observation stays to avoid admitting patients as inpatients — a strategy that helps plans reduce costs but shifts financial burden onto hospitals. Recent data show that this practice is worsening. In 2019, MA patients had observation stays 28.6% longer than those in Traditional Medicare; by 2024, the gap widened to 36.9% (see Figure 4). These prolonged observation stays drive up hospital costs without a corresponding increase in reimbursement, further straining hospital finances. Compared to inpatient admissions, observation stays are reimbursed at lower rates — or in some cases, not at all — leaving hospitals to absorb much of the cost. In 2024, MA plans reimbursed just 49% of the actual cost for patients held in observation status, according to industry benchmark data from Strata Decision Technology, LLC.</p><h3>Longer Stays, Lower Payments</h3><p>The inpatient setting reveals a similar pattern: longer stays for MA patients but with lower reimbursement. From 2019 to 2024, the average length of stay for MA patients grew substantially compared to Traditional Medicare — more than doubling the gap over this period, according to industry benchmark data from Strata Decision Technology, LLC. Yet during the same timeframe, hospital reimbursement from MA plans fell by 8.8% on a cost basis. In other words, hospitals are being asked to do more with less.</p><h3>Discharge Delays Are Compounding the Problem</h3><p><img src="/sites/default/files/inline-images/Figure-5-MA-Delays-Discharges-to-Post-Acute-Care.png" data-entity-uuid="d76d655b-ff83-40d7-a6f0-f179c94a93a6" data-entity-type="file" alt="Figure 5. MA Delays Discharges to Post-Acute Care. Percent Longer MA Stay Compared to Traditional Medicare. 2019: 6.4%. 2020: 6.0%. 2021: 10.5%. 2022: 14.7%. 2023: 13.9%. 2024: 12.6%. Note: Data from industry benchmark data from Strata Decision Technology, LLC." width="592" height="434" class="align-right">Delays in discharging patients to post-acute care facilities are a growing contributor to longer inpatient stays. These delays are often driven by prior authorization requirements or insufficient post-acute provider networks within MA plans. Among MA patients, the average length of stay prior to discharge to post-acute care has doubled relative to Traditional Medicare between 2019 and 2024 (see Figure 5). These delays lead to higher costs, increased hospital crowding — including in the emergency department — and longer lengths of stay. In some cases, plans may use these delays to steer patients toward lower-cost care settings — or avoid post-acute care altogether — while the hospital continues to absorb the cost of care. A Senate Permanent Subcommittee report recently found that some MA plans disproportionately imposed prior authorization and claim denials on post-acute care, exacerbating delays and shifting costs to hospitals.<a href="#fn2"><sup>2</sup></a> Post-acute care providers also have faced lagging reimbursement rates from Medicare, which has exacerbated staffing challenges and made it difficult to accommodate discharge requests from acute-care hospitals.</p><h3>Lower Reimbursement and Increasing Administrative Burden</h3><p>Hospitals are increasingly reporting lower negotiated MA rates than Traditional Medicare for many common inpatient services (see Figure 6). These discrepancies continue to create significant financial challenges for hospitals, especially for those in rural areas that have seen relatively fast growth in the volume of MA beneficiaries in recent years.<a href="#fn3"><sup>3</sup></a></p><img src="/sites/default/files/inline-images/MA-Negotiated-Rates-as-a-Percentage-of-Traditional-Medicare-Rates-Selected-DRGs.png" data-entity-uuid="062e44a9-197b-4ab3-b674-4c5bff0ce4e5" data-entity-type="file" alt="MA Negotiated Rates as a Percentage of Traditional Medicare Rates, Selected DRGs. MS-DRG 190 Chronic Obstructive Pulmonary Disease: 96.5% of FFS rates. MS-DRG 280 Acute Myordial Infarction: 96.2% of FFS rates. MS-DRG 470 Major Joint Replacement or Reattachment of Lower Extremity: 97.6% of FFS rates. Note: AHA analysis of hospital price transparency data from Turquoise Health. Figures calculated by dividing hospital-level median MA rates by hospital-specific baseline FFS rates. Outliers excluded (5th and 95th percentiles)." width="1062" height="289" class="align-center"><p>At the same time, administrative complexity continues to increase. MA plans issued nearly 50 million prior authorizations in 2023 — up more than 40% since 2020, according to KFF.<a href="#fn4"><sup>4</sup></a> A Premier study found that hospitals spent $26 billion in 2023 managing insurance claims — a 23% increase over the previous year.<a href="#fn5"><sup>5</sup></a></p><p>Notably, 70% of denied claims were eventually paid, but only after multiple costly reviews. These burdens not only strain hospitals financially but also delay care and divert clinical staff from patient care. A Morning Consult survey commissioned by the AHA found that 85% of clinicians report that prior authorization and other requirements delay necessary care.</p><h2>Impact of Tariffs on Hospital Costs</h2><p>Hospitals and health systems rely on the right medicines, devices and other supplies used at the right time to support the delivery of safe and effective care. The supply chain for these essential medical goods is complex, weaving together both domestic and international sourcing, and is prone to significant disruption. For example, as of March 2025, there were 270 active drug shortages in the U.S., including shortages of life-saving intravenous (IV) fluids stemming from Hurricane Helene in 2024.<a href="#fn6"><sup>6</sup></a> Recent changes in U.S. trade policy are creating additional uncertainty, with the Administration implementing new tariffs that affect medical devices and supplies, and considering new tariffs on pharmaceuticals. Tariffs on these critical goods could exacerbate shortages, disrupt patient care and raise costs for hospitals.</p><p>Despite efforts to bolster the domestic supply chain, a significant proportion of essential medical goods come from international sources. For example, nearly 70% of medical devices marketed in the U.S. are manufactured exclusively overseas.<a href="#fn7"><sup>7</sup></a> In 2024 alone, the U.S. imported over $75 billion in medical devices and supplies, according to AHA analysis of Census Bureau data. These imports include many lowmargin, high-use essentials in hospital settings — such as syringes, needles, blood pressure cuffs, and IV saline bags. Hospitals rely on imports for advanced surgical tools and other critical technologies as well.</p><p>Moreover, hospitals rely on international sources for a significant proportion of the protective equipment for their caregivers. In 2023, Chinese manufacturers supplied the majority of N95 and other respirators used in health care. Additionally, China was the source for one-third of disposable face masks, two-thirds of non-disposable face masks, and 94% of the plastic gloves used in health care settings.<a href="#fn8"><sup>8</sup></a></p><p>Many pharmaceuticals — and especially the key starter ingredients that go into them — also are sourced from overseas. The U.S. gets nearly 30% of its active pharmaceutical ingredients (APIs) from China.<a href="#fn9"><sup>9</sup></a> According to a 2023 Department of Health and Human Services estimate, over 90% of generic sterile injectable drugs — such as certain chemotherapy treatments and antibiotics — depend on key starter materials from either India or China.<a href="#fn10"><sup>10</sup></a> Even temporary disruptions in access to medication and supplies can impact care and increase the risk of patient harm.</p><p>Tariffs on medical imports could significantly raise costs for hospitals. A recent survey found that 82% of health care experts expect tariff-related expenses to raise hospital costs by at least 15% over the next six months, and 94% of health care administrators expected to delay equipment upgrades to manage financial strain.<a href="#fn11"><sup>11</sup></a> Tariffs also may force hospitals to seek new vendors — often at higher cost or with lower reliability. In fact, 90% of supply chain professionals are expecting procurement disruptions.<a href="#fn12"><sup>12</sup></a></p><h2>Conclusion: Supporting Hospitals Means Supporting Patients</h2><p>Hospitals are not only centers of care but also vital economic engines in their communities. Rising costs, inadequate reimbursement, and policy-driven inefficiencies jeopardize the ability of hospitals to deliver high-quality, timely care. To ensure that hospitals can continue to serve patients and communities, policymakers should:</p><ul class="arrow"><li class="arrow">Recognize that rising expenses reflect real pressures, such as labor shortages and increasing demand — not inefficiency.</li><li class="arrow">Acknowledge Medicare and MA payment policies must be updated to reflect the actual cost of care.</li><li class="arrow">Address structural drivers of cost, such as care delays and excessive administrative burdens, instead of simply cutting payments.</li></ul><p>As we look to the future, preserving access to hospital care should be a national priority. Supporting hospitals means supporting patients, communities and the entire health care system.</p><hr><h2>Notes</h2><ol><li id="fn1"><a href="https://www.healthaffairs.org/doi/10.1377/hlthaff.2024.01375" target="_blank">healthaffairs.org/doi/10.1377/hlthaff.2024.01375</a></li><li id="fn2"><a href="https://www.hsgac.senate.gov/wp-content/uploads/2024.10.17-PSI-Majority-Staff-Report-on-Medicare-Advantage.pdf" target="_blank">hsgac.senate.gov/wp-content/uploads/2024.10.17-PSI-Majority-Staff-Report-on-Medicare-Advantage.pdf</a></li><li id="fn3"">aha.org/system/files/media/file/2025/02/growing-impact-of-medicare-advantage-on-rural-hospitals.pdf</li><li id="fn4"><a href="https://www.kff.org/medicare/issue-brief/nearly-50-million-prior-authorization-requests-were-sent-to-medicare-advantage-insurers-in-2023/" target="_blank">kff.org/medicare/issue-brief/nearly-50-million-prior-authorization-requests-were-sent-to-medicare-advantage-insurers-in-2023/</a></li><li id="fn5"><a href="https://premierinc.com/newsroom/blog/claims-adjudication-costs-providers-25-7-billion" target="_blank">premierinc.com/newsroom/blog/claims-adjudication-costs-providers-25-7-billion</a></li><li id="fn6"><a href="https://www.ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics?loginreturnUrl=SSOCheckOnly" target="_blank">ashp.org/drug-shortages/shortage-resources/drug-shortages-statistics?loginreturnUrl=SSOCheckOnly</a></li><li id="fn7"><a href="https://www.medicaldevice-network.com/analyst-comment/trump-tariffs-us-medical-device-market/" target="_blank">medicaldevice-network.com/analyst-comment/trump-tariffs-us-medical-device-market/</a></li><li id="fn8">AdvaMed presentation, 2023.</li><li id="fn9"><a href="https://www.atlanticcouncil.org/blogs/econographics/the-us-is-relying-more-on-china-for-pharmaceuticals-and-vice-versa/" target="_blank">atlanticcouncil.org/blogs/econographics/the-us-is-relying-more-on-china-for-pharmaceuticals-and-vice-versa/</a></li><li id="fn10"><a href="https://aspe.hhs.gov/sites/default/files/documents/3a9df8acf50e7fda2e443f025d51d038/HHS-White-Paper-Preventing-Shortages-Supply-Chain-Vulnerabilities.pdf" target="_blank">aspe.hhs.gov/sites/default/files/documents/3a9df8acf50e7fda2e443f025d51d038/HHS-White-Paper-Preventing-Shortages-Supply-Chain-Vulnerabilities.pdf</a></li><li id="fn11"><a href="https://www.beckershospitalreview.com/supply-chain/hospital-finance-supply-leaders-predict-15-increase-in-tariff-related-costs/" target="_blank">beckershospitalreview.com/supply-chain/hospital-finance-supply-leaders-predict-15-increase-in-tariff-related-costs/</a></li><li id="fn12"><a href="https://www.beckershospitalreview.com/supply-chain/hospital-finance-supply-leaders-predict-15-increase-in-tariff-related-costs/" target="_blank">beckershospitalreview.com/supply-chain/hospital-finance-supply-leaders-predict-15-increase-in-tariff-related-costs/</a></li></ol></div><div class="col-md-4"><p><a href="/system/files/media/file/2025/04/The-Cost-of-Caring-April-2025.pdf" target="_blank" title="Click here to download the The Cost of Caring: Challenges Facing America’s Hospitals in 2025 report PDF."><img src="/sites/default/files/inline-images/Page-1-The-Cost-of-Caring-April-2025.png" data-entity-uuid="658521c4-19cc-4776-a588-acc23144a3be" data-entity-type="file" alt="The Cost of Caring: Challenges Facing America's Hospitals in 2025 page 1." width="695" height="900"></a></p><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2025-04-28-2024-costs-caring" target="_blank">View the 2024 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-09-10-skyrocketing-hospital-administrative-costs-burdensome-commercial-insurer-policies-are-impacting" target="_blank">View the Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-05-01-2023-costs-caring" target="_blank">View the 2023 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2023-04-20-2022-costs-caring" target="_blank">View the 2022 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2021-10-25-2021-cost-caring" target="_blank">View the 2021 Costs of Caring Report</a></div></div></div></div> h2 { color: #9d2235; } h3 { color: #003087; } ul.arrow { list-style: none; margin-left: 20px; padding-left: 0; } li.arrow { padding-left: 1em; text-indent: 1em; } li.arrow:before { content: "🠲"; color: #003087; padding-right: 10px; margin-left: -42px; } Wed, 30 Apr 2025 06:00:00 -0500 Drug Prices /guidesreports/2025-04-28-2024-costs-caring <div class="container"><div class="row"><div class="col-md-8"><h2><span>Introduction</span></h2><p><img src="/sites/default/files/inline-images/Figure-1-Labor-constitutes-largest-percentage-of-hospital-expenses.png" data-entity-uuid="d6c1793f-d4c3-44ea-8ba5-d1f15b6518e2" data-entity-type="file" alt="Figure 1. Labor constitutes largest percentage of hospital expenses. Labor: 60% ($839 Billion); Supplies: 13% ($181 Billion); Drugs: 8% ($115 Billion); Other: 19% ($269 Billion). Note: Average expenses estimated by Strata Decision Technology median 2023 values across all hospital spending. Labor is inclusive of purchased services and professional fees." width="718" height="752" id="figure1" class="align-right">Hospitals and health systems have been at the forefront of a major transformation while at a crossroads of increasing demand for higher acuity care and deepening financial instability. Persistent workforce shortages, severe fractures in the supply chain for drugs and supplies, and high levels of inflation have collectively fueled hospitals’ costs as they care for patients 24/7 (see <a href="#figure1">Figure 1</a>). At the same time, hospitals’ costs have been met with inadequate increases in reimbursement by government payers and increasing administrative burden due to inappropriate commercial health insurer practices.</p><p><strong>Taken together, these issues have created an environment of financial uncertainty where many hospitals and health systems are operating with little to no margin. While recent data suggest that some hospital and health system finances have experienced modest stabilization from historic lows in 2022, the hospital field is still far from where it needs to be to meet the demand for care, invest in new and promising technologies and interventions, and stand ready for the next health care crisis.</strong></p><p><img src="/sites/default/files/inline-images/Figure-2-Inflation-growth-was-more-than-double-the-growth-in-IPPS-reimbursement-2021-2023.png" data-entity-uuid="90ce5355-e63a-4187-bfae-5a641d891486" data-entity-type="file" alt="Figure 2. Inflation growth was more than double the growth in IPPS reimbursement, 2021–2023. Inflation: 12.4%; IPPS Increases: 5.2%. Note: Inflation calculated using annual average CPI-U between 2021 and 2023 from BLS. IPPS increase from FY2020–2023 market basket increases net of other adjustments." width="385" height="705" id="figure2" class="align-left">Fresh off a historically challenging year financially in 2022 in which over half of hospitals closed out the year operating at a loss, many hospitals spent much of 2023 simply struggling to break even.<a href="#fn1"><sup>1</sup></a> Economy-wide inflation grew by 12.4% between 2021 and 2023 – more than two times faster than Medicare reimbursement for hospital inpatient care (see <a href="#figure2">Figure 2</a>).</p><p>Since the start of 2022, the number of days cash on hand for hospitals and health systems has declined by 28.3%, according to data from Strata Decision Technology, which provides data and cloud-based financial planning, decision support and performance analytics solutions.<a href="#fn2"><sup>2</sup></a></p><p>Diverting dollars from their reserves to maintain access to care has required tradeoffs that have limited many hospitals and health systems from investing in updated infrastructure, new medical technology and equipment, and other clinical needs — particularly among those hospitals in severe financial distress.<a href="#fn3"><sup>3</sup></a><sup>,</sup><a href="#fn4"><sup>4</sup></a> For example, the average age of capital investments for medical equipment and infrastructure, after years of remaining relatively flat, increased by 7.1% for all hospitals in 2023, according to data from Strata Decision Technology. While the constraints and burdens of increasing plant age present serious challenges to hospitals and health systems in their own right, the inability to make needed capital investments has contributed to bond rating agencies issuing rating downgrades, making it harder for some hospitals and health systems to borrow money.<a href="#fn5"><sup>5</sup></a> Ongoing reimbursement challenges, made worse by crises like the recent Change Healthcare cyberattack, and increased operating costs create an unsustainable financial environment.<a href="#fn6"><sup>6</sup></a> While these challenges alone could cripple any organization, hospitals and health systems continue to face additional threats from ongoing Medicaid redeterminations increasing uncompensated care<a href="#fn7"><sup>7</sup></a>, regulatory changes that add operational burden, cyberattacks that threaten the health care infrastructure and potential legislation that would further cut Medicare payments to hospitals.</p><p>This report provides a snapshot of the current cost realities facing hospitals and health systems and how they impact their ability to care for patients and communities.</p><h2><span>1. Costs of Providing Essential Services</span></h2><p><img src="/sites/default/files/inline-images/Figure-3-Cumulative-Medicaid-and-Medicare-underpayments.png" data-entity-uuid="1846fd31-a865-4fcb-8de7-b4ca6bf1b3f2" data-entity-type="file" alt="Figure 3. Cumulative Medicaid and Medicare underpayments. 2013 to 2017: -$375 Billion; 2018 to 2022: -$522 Billion. Note: AHA Annual Survey 2013 to 2022 all dollars inflation adjusted to 2022 values using CPI-U from the BLS." width="620" height="672" id="figure3" class="align-right">Hospitals often play the critical — and sometimes only — role in providing access to essential health care services, such as emergency care and behavioral health, which are necessary for the health and well-being of the communities they serve. Further, oftentimes these are services that are not offered by other types of health care providers. In 2022, the most recent year for which data are available, hospitals admitted nearly 137 million patients in emergency departments and delivered over 3.5 million babies.<a href="#fn8"><sup>8</sup></a> Many of these essential services are extremely resource intensive and costly to offer. Further compounding this issue are demographic trends such as an aging population and clinical factors such as higher patient acuity. This has driven a steady rise in the share of inpatient utilization among more clinically complex patients covered by Medicare and Medicaid.<a href="#fn9"><sup>9</sup></a> Not only are inpatient services costlier to provide, but public payer payments for these services fall well below costs. In fact, underpayments from Medicare and Medicaid totaled nearly $130 billion in 2022, and Medicare paid just 82 cents for every dollar hospitals spent caring for patients — resulting in a shortfall of almost $100 billion.<a href="#fn10"><sup>10</sup></a> Troublingly, cumulative underpayments in the second half of the last decade totaled more than half a trillion dollars — a nearly 40% increase compared to the first half even after adjusting for inflation (see <a href="#figure3">Figure 3</a>).</p><p>However, the reimbursement challenges do not end with Medicare and Medicaid Reimbursement for some services consistently fall below costs across all payer types. For example, payments for inpatient behavioral health services were 34.3% below costs across all payers on average in 2023, according to data from Strata Decision Technology (see <a href="#figure4">Figure 4</a>). This is especially concerning given the increased utilization of behavioral health services over the last few years.</p><img src="/sites/default/files/inline-images/Figure-4-Hospital-payments-do-not-cover-the-costs-of-providing-vital-patient-services-20240612.png" data-entity-uuid="96ed5e28-677a-4ba0-8659-407033fe0a56" data-entity-type="file" alt="Figure 4. Hospital payments do not cover the costs of providing vital inpatient services. Average margin on services: Behavioral Health -34.3%; Nephrology -34.1%; Burns and Wounds -24.1%; Pulmonology -19.4%; Infectious Disease -15.3%. Note: AHA analysis of 2023 average service line payment and cost across all payers from Strata Decision Technology. Does not include supplemental payments from Medicaid." width="1565" height="623" id="figure4"><p>In the outpatient setting, average payments for costly burn and wound services were 42.9% below costs across all payers (see <a href="#figure5">Figure 5</a>). These shortfalls have been especially acute for government payers like Medicare. For example, average Medicare margins for behavioral health services were -38.9% in 2023.</p><img src="/sites/default/files/inline-images/Figure-5-Hospital-payments-also-fail-to-cover-the-costs-of-providing-essential-outpatient-services.png" data-entity-uuid="a43ea45f-a309-46a9-9acc-fb54b385b5b2" data-entity-type="file" alt="Figure 5. Hospital payments also fail to cover the costs of providing essential outpatient services. Average margin on services: Burns and wounds -42.9%; Nephrology -32.3%; Behavioral Health -31.7%; Pulmonology -17.5%; Infectious Disease -12.1%. Note: AHA analysis of 2023 average service line payment and cost across all payers from Strata Decision Technology. Does not include supplemental payments from Medicaid." width="1558" height="616" id="figure5"><p>Taken together, these data highlight the challenges that hospitals and health systems face in providing essential services that communities need. This is particularly true for hospitals in rural areas, where the financial challenges can be even more severe.</p><h2><span>2. Hospital Administrative Expenses</span></h2><p><span><em><strong><img src="/sites/default/files/inline-images/Figure-6-Premiums-grew-twice-as-fast-as-hospital-prices-in-2023.png" data-entity-uuid="d158d191-431b-4548-aebc-57269df046dc" data-entity-type="file" alt="Figure 6. Premiums grew twice as fast as hospital prices in 2023. Health Insurance Premiums: 6.7%; Hospital Prices: 2.6%. Note: Health insurance premiums represent premiums for a family of four, from KFF Employer Health Benefits Survey, 2023. Hospital Prices: BLS, annual average Producer Price index for hospitals." width="607" height="790" id="figure6" class="align-right">Some commercial health insurer practices increase hospital costs and delay care to patients</strong></em></span></p><p>Hospitals have seen significant growth in administrative costs due to inappropriate practices by certain commercial health insurers, including Medicare Advantage (MA) and Medicaid managed care plans. In addition to increasing premiums, which grew twice as fast as hospital prices in 2023, commercial health insurers have overburdened hospitals with time-consuming and labor-intensive practices like automatic claims denials and onerous prior authorization requirements (see <a href="#figure6">Figure 6</a>).<a href="#fn11"><sup>11</sup></a></p><p>A 2021 study by McKinsey estimated that hospitals spent $10 billion annually on dealing with insurer prior authorizations.<a href="#fn12"><sup>12</sup></a> Additionally, a 2023 study by Premier found that hospitals are spending just under $20 billion annually in appealing denials — more than half which was wasted on claims that should have been paid out at the time of submission.<a href="#fn13"><sup>13</sup></a> Denials issued by commercial MA plans rose sharply by 55.7% in 2023.<a href="#fn14"><sup>14</sup></a> Notably, many of these denials were ultimately overturned, consistent with a study by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) that found 75% of care denials were subsequently overturned.<a href="#fn15"><sup>15</sup></a> These denials are particularly concerning because they often occur for medically necessary care, which can result in direct patient harm. In fact, a recent HHS OIG report found that nearly one in five MA denials met Medicare coverage rules, which meant that had they been paid via Medicare fee-for-service, they would have been paid without denial.<a href="#fn16"><sup>16</sup></a> Even when denials are ultimately overturned, hospitals are not paid for the costs incurred to navigate that burdensome and resource-intensive process. Making matters worse, MA plans paid hospitals less than 90% of Medicare rates despite costing taxpayers more than traditional Medicare in 2023.<a href="#fn17"><sup>17</sup></a><sup>,</sup><a href="#fn18"><sup>18</sup></a> Although partly a function of lower rates, the worsening administrative overload is simply costing hospitals more and more.</p><p>Though these issues are often felt most acutely with MA and Medicaid managed care plans, it also is true for other commercial payers, where claims denials increased by 20.2% in 2023. Moreover, the time taken by commercial payers to process and pay hospital claims from the date of submission increased by 19.7% in 2023, according to data from the Vitality Index. For hospitals and health systems, these practices result in billions of dollars in lost revenue each year, which require hospitals to divert dollars away from patient care to instead focus on seeking payment from commercial insurers.<a href="#fn19"><sup>19</sup></a> Without further intervention, these trends are expected to continue and worsen. National expenditures on the administrative costs of private health insurance spending alone are projected to account for 7% of total health care spending between 2022 and 2031 and are projected to grow faster than expenditures for hospital care.<a href="#fn20"><sup>20</sup></a></p><h3><span>Other expenses</span></h3><p>Hospitals also are spending more on things that are not direct patient care services but are still critical to delivering care and maintaining operations. For example, the costs associated with implementing, maintaining and upgrading information management systems and overall technology infrastructure, while critical to improving efficiency and quality of care, typically represent significant investments.</p><p>Additionally, given the confidential nature of patient data in these systems, hospitals have increasingly become targets for cyberattacks. As a result, the costs of defending against these attacks and protecting patient data has grown steadily.<a href="#fn21"><sup>21</sup></a> Health care data breaches are by far the costliest of any other sector.<a href="#fn22"><sup>22</sup></a> As cyberattacks and data breaches in health care have grown and regulators are requiring more robust protections, hospitals and health systems are finding themselves increasingly trying to invest in cybersecurity.<a href="#fn23"><sup>23</sup></a> Protecting against cyberattacks and other vulnerabilities is important to patient care, but is increasingly costly. In 2022, hospitals spent nearly $30 billion on property and medical liability insurance, according to data from Lightcast.</p><h2><span>3. Hospital Drug Expenses</span></h2><p>An area of persistent cost pressure for hospitals and health systems has been the rapid and sustained growth in drug expenses. Hospitals spent $115 billion on drug expenses in 2023 alone. One of the factors fueling this growth is drug company decisions to impose large price increases on existing drugs. However, 2023 also saw a continuation of a long-standing trend of drug companies introducing new drugs at record prices. In 2023, the median annual list price for a new drug was $300,000, an increase of 35% from the prior year (see <a href="#figure7">Figure 7</a>).<a href="#fn24"><sup>24</sup></a> A recent report by the HHS Assistant Secretary for Planning and Evaluation (ASPE) found that between 2022 and 2023, prices for nearly 2,000 drugs increased faster than the rate of general inflation, with an average price hike of 15.2%.<a href="#fn25"><sup>25</sup></a></p><img src="/sites/default/files/inline-images/Figure-7-Annual-List-Prices-of-Novel-Drugs-Launched-in-2023.png" data-entity-uuid="b88a70d2-300e-48d9-90f9-e3fbe3b80e83" data-entity-type="file" alt="Figure 7. Annual List Prices of Novel Drugs Launched in 2023*. Elevidys: $3,200,000; Roctavian: $2,900,000; Veopoz: $1,799,980; Altuviiio: $970,000; Pombiliti: $650,000; Talvey: $360,000; Orserdu: $280,526; Adzynma: $245,000; Zynyz: $170,880; Filspari: $129,965; Velsipity: $74,000; Leqembi: $26,000. Median price of new drug: $300,000. Median household: $74,580. Average price of a new car: $48,759. Source: Annual list prices of novel drugs launched in 2023 are from a Reuters survey of new drug costs. Median household income is from 2022 Census Bureau data. Average price of new care is from Kelly Blue Book new-vehicle transaction price in December 2023." width="1563" height="771" id="figure7"><p><img src="/sites/default/files/inline-images/Figure-8-Increase-in-drug-shortages-and-drug-prices-2022-2023.png" data-entity-uuid="e6973989-b4db-4b1f-a2ac-dd8b512598d6" data-entity-type="file" alt="Figure 8. Increase in drug shortages and drug prices, 2022–2023. 2022: Drug Shortages 8.0%; Drug Prices 11.5%. 2023: Drug Shortages: 13.0%; Drug Prices 15.2%. Note: Drug shortage data from Utah Drug Information System; Drug price data from ASPE." width="607" height="691" id="figure8" class="align-right">While high drug prices alone pose significant challenges for hospitals and health systems, it is compounded by the fact that many of these same drugs are in shortage. In fact, 2023 saw the most drug shortages in over a decade; there were an average of 301 drugs in shortage per quarter, an increase of 13.0% from the previous year (see <a href="#figure8">Figure 8</a>). These shortages added as much as 20% to hospital drug budgets, according to data from the American Society of Health System Pharmacists (ASHP). These shortages can occur for many reasons, including fractured global supply chains lack of available raw materials, and decisions by drug companies that lack incentives to produce low-margin generic medications.<a href="#fn26"><sup>26</sup></a> An ASHP survey found that more than 99% of hospital and health system pharmacists experienced drug shortages in 2023, with 85% of respondents describing the severity of drug shortages as critically or moderately impactful.<a href="#fn27"><sup>27</sup></a> While generic drugs comprised the majority of medications in shortage, estimated to make up as much as 83% of shortages, many of these drugs also were used to treat cancer and autoimmune diseases.<a href="#fn28"><sup>28</sup></a></p><p>Hospital pharmacy staff have limited options for navigating drug shortages. They can purchase the drug by going outside their traditional suppliers and group purchasing agreements, access alternate concentrations or package sizes of the drugs than what is needed or purchase a substitute drug with the same clinical indication. However, all three of these options mean hospitals pay higher prices to acquire the drugs. An ASPE report found up to a 16.6% increase in the prices of drugs in shortage; in many cases, the increase in the price of substitute drugs were at least three times higher than the price increase of the drug in shortage.<a href="#fn29"><sup>29</sup></a> The costs incurred as a result of drug shortages are compounded by staff overtime needed to find, procure and administer alternative drugs, to manage the added challenges of multiple medication dispensing automation systems and changing electronic health records (EHRs), and to undergo training to ensure medication safety using alternative therapies.<a href="#fn30"><sup>30</sup></a></p><h2><span>4. Hospital Supply Costs</span></h2><div class="row"><div class="col-md-5"><p>Having adequate and up-to-date medical supplies, devices and equipment are necessary for hospitals to deliver high quality care to patients. These can include artificial joints used to treat patients with conditions such as arthritis, robotic surgery machines used to perform laparoscopic surgical procedures, and complex imaging machinery used for clinical diagnostics. Most of these items are expensive to acquire and maintain and rely on increasingly volatile global supply chains. Comprising approximately 10.5% of the average hospital’s budget, medical supply expenses collectively accounted for $146.9 billion in 2023, an increase of $6.6 billion over 2022, according to data from Strata Decision Technology. As technology and science are constantly evolving, hospitals routinely need to purchase new supplies, devices and equipment that meet clinical care standards and ensure high quality care.</p><p>The upfront costs for critical equipment and device upgrades come at a significant cost (<a href="#table1">Table 1</a>). For example, the advanced technology of cardiac magnetic resonance imaging (cMRI) machines, which have allowed doctors to develop a deeper understanding of cardiac pathologies and has led to improved diagnostics, costs hospitals on average $3.2 million. For some hospitals that have high demand for cardiac services, they may need to purchase multiple cMRI machines. The additional costs for ongoing maintenance, upgrades and staff training also add to the total costs hospitals must incur to deliver their patients with the high quality care.</p></div><div class="col-md-7"> table, th, td { border: 1px solid; } th { background-color: #69b3e733; } } <table id="table1"><tbody><tr><td><h3>Table 1. Medical Device and Equipment Market Prices</h3></td></tr><tr><td><em>Cutting-edge innovation and technologies provide hospitals with the means to enhance patient outcome in their continuous commitment to delivering top-tier patient care. The featured equipment is intricately connected to advancements in diagnostics, heightened success rates in cardiovascular surgery, and more effective joint replacement procedures.</em></td></tr></tbody></table><table><thead><tr><th>Medical Devices and Equipment</th><th>Average List Price</th></tr></thead><tbody><tr><td colspan="2"><strong>Point of Care ultrasound devices</strong></td></tr><tr><td>Pocket-sized handheld or tablet-based</td><td>$8,143</td></tr><tr><td>Compact ultrasound systems*</td><td>$73,797</td></tr><tr><td colspan="2"><strong>Cardiovascular diagnostic and surgical equipment</strong></td></tr><tr><td>Cardiac magnetic resonance imaging (cMRI) machine</td><td>$3,230,728</td></tr><tr><td>Cardiopulmonary bypass system</td><td>$325,442</td></tr><tr><td colspan="2"><strong>Joint implant proprietary software and equipment</strong></td></tr><tr><td>Image based planning software</td><td>$222,132</td></tr><tr><td>Navigation software system (guide surgeons in real-time)</td><td>$135,365</td></tr><tr><td colspan="2"><p>*Larger than handheld devices, but still portable. May have more advanced features.</p><p><span><strong>Note:</strong></span> Market prices of medical devices and equipment are courtesy of ECRI, an independent not-for-profit corporation that provides a wide range of services dealing with health care technology.</p></td></tr></tbody></table></div></div><h2><span>5. Hospital Labor Costs</span></h2><p>Hospitals’ labor costs increased by more than $42.5 billion between 2021 and 2023 to a total of $839 billion, accounting for nearly 60% of the average hospital’s expenses. Hospitals continue to turn to expensive contract labor to fill gaps and maintain access to care, spending approximately $51.1 billion on contracted staff in 2023.</p><p><img src="/sites/default/files/inline-images/Figure-9-Growth-in-Total-Hospital-Employee-Compensation-Far-Outpaces-Inflation.png" data-entity-uuid="5fa4709d-12e9-47f3-af06-07ac3b0937b6" data-entity-type="file" alt="Figure 9. Growth in Total Hospital Employee Compensation Far Outpaces Inflation. 2014 to 2023: Inflation 28.7%; Hospital Employee Compensation 45.0%. Note: BLS Annual average Employee Cost Index, 2014 to 2023 for hospitals and CPI-U, 2014 to 2023." width="522" height="592" id="figure9" class="align-right">Though expenditures on contract labor have moderated since pandemic highs, the spending remains elevated and has added to the financial challenges hospitals and health systems face. This is especially true for smaller, rural hospitals where the local workforce pool is smaller and it can be more difficult to recruit staff. Hospitals’ labor costs also can be very sensitive to sudden fluctuations in the demand and supply of labor. Growth in wages and benefits of hospital employees has vastly surpassed economy-wide inflation over the last decade (see <a href="#figure9">Figure 9</a>).</p><p>Yet, critical labor shortages persist, especially in the face of growing burnout among clinicians. Employee burnout hastened by the pandemic and further exacerbated by commercial insurer administrative burden and increase in violence against hospital employees, led to an unprecedented exodus of health care professionals in recent years.<a href="#fn31"><sup>31</sup></a> Resignations per month among health care workers grew 50% between 2020 and 2023, according to data from McKinsey.<a href="#fn32"><sup>32</sup></a> Additionally, hospitals have been forced to contend with record high turnover rates — fueling additional expenses for hospitals looking to recruit new workers.<a href="#fn33"><sup>33</sup></a></p><p>Consequently, hospitals and health systems have invested more to attract and retain talent. Data from Lightcast indicates that advertised wage rates across all hospital jobs jumped by 10.1% during 2023. With a growing gap between supply and demand for health care workers over the next decade, labor costs will likely continue to be an issue for hospitals.</p><h2><span>A Look Ahead to the Rest of 2024</span></h2><p>Though 2024 is the first full year out of the most recent public health emergency period, hospitals and health systems continue to face many challenges. Credit ratings agencies have painted a bleak picture for the hospital sector in 2024.<a href="#fn34"><sup>34</sup></a> According to the S&P, negative outlooks for not-for-profit hospitals are proportionally at their highest in over a decade, affecting 24% of the sector.<a href="#fn35"><sup>35</sup></a> Similarly, Fitch reported a credit downgrade-to-upgrade ratio of 3:1 — alarmingly close to the ratio seen during the 2008 financial crisis — calling it a “make or break” year and highlighting the sector’s struggles, particularly among smaller hospitals with annual revenues under $500 million.<a href="#fn36"><sup>36</sup></a> While it is expected that hospitals and health systems will continue to face cost increases for labor, drugs, and medical supplies, there are additional headwinds to consider which include:</p><ul><li>Coverage losses due to Medicaid redeterminations: More than 19 million Medicaid enrollees have been disenrolled through 2023.<a href="#fn37"><sup>37</sup></a> Though partially offset by record Marketplace enrollment and possible enrollment in employer-sponsored coverage, this has still resulted in a steady increase in uncompensated care costs throughout 2023 and will likely continue into 2024 – particularly for states that have not expanded Medicaid.<a href="#fn38"><sup>38</sup></a></li><li>Potential legislative actions to cut hospital Medicare payments for patient care: Congress is considering several bills that would impose additional payment reductions to services provided in hospital outpatient departments. These proposals, referred to as “siteneutral” payment cuts, would exacerbate financial challenges for hospitals and threaten patients’ access to quality care.</li><li>Cybersecurity risks impact providers and patient care: The cyberattack on Change Healthcare in February 2024 has underscored the extensive repercussions such incidents can have on patient care and hospital operations. The disruptions stemming from that cyberattack have significantly hindered revenue cycle management, pharmacy services, select health care technologies, clinical authorizations, and more across multiple health systems, serving as an example of how an attack can reverberate across the entire health care sector when a business that provides numerous mission-critical services is compromised.<a href="#fn39"><sup>39</sup></a></li><li>Ongoing and escalating hospital violence: There has been a significant uptick in violence against health care workers in recent years.<a href="#fn40"><sup>40</sup></a> To address this issue, hospitals are making significant investments in violence prevention and preparedness efforts to support their employees.</li></ul><h2><span>Conclusion</span></h2><p>America’s hospitals and health systems are dedicated to providing high-quality 24/7 care to all patients in every community across the country. While the commitment to caring and advancing health never wavers, hospitals continue to face significant challenges making it difficult to ensure the care is always there.</p><p>The AHA continues to urge Congress and the Administration to support policies to make sure hospitals and health systems have the resources they need to continue providing 24/7 care to all patients and communities. These include:</p><ul><li>Rejecting Medicare and Medicaid cuts to hospital care, including harmful site-neutral proposals and forthcoming reductions to Medicaid Disproportionate Share hospitals.</li><li>Supporting and strengthening the health care workforce.</li><li>Protecting the 340B Drug Pricing Program from any harmful changes and reining in the increasing costs of drugs.</li><li>Taking actions to hold commercial insurers accountable for practices that delay, deny and disrupt care.</li><li>Bolstering support to enhance cybersecurity of hospitals and the entire health care system.</li></ul><hr><h2>End Notes</h2><ol><li id="fn1"><a href="www.kaufmanhall.com/news/2022-worst-financial-year-hospitals-and-health-systems-start-pandemic" target="_blank">www.kaufmanhall.com/news/2022-worst-financial-year-hospitals-and-health-systems-start-pandemic</a></li><li id="fn2"><a href="https://www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf" target="_blank">www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf</a></li><li id="fn3"><a href="https://fortune.com/well/2024/01/11/rural-hospitals-are-caught-in-an-aging-infrastructure-conundrum/" target="_blank">fortune.com/well/2024/01/11/rural-hospitals-are-caught-in-an-aging-infrastructure-conundrum/</a></li><li id="fn4"><a href="/guidesreports/2023-04-19-essential-role-financial-reserves-not-profit-healthcare" target="_blank">www.aha.org/guidesreports/2023-04-19-essential-role-financial-reserves-not-profit-healthcare</a></li><li id="fn5"><a href="https://www.modernhealthcare.com/finance/hospital-2023-credit-rating-downgrade-fitch-ratings-sp-global-moodys" target="_blank">www.modernhealthcare.com/finance/hospital-2023-credit-rating-downgrade-fitch-ratings-sp-global-moodys</a></li><li id="fn6"><a href="/cybersecurity/change-healthcare-cyberattack-updates" target="_blank">www.aha.org/cybersecurity/change-healthcare-cyberattack-updates</a></li><li id="fn7"><a href="/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further" target="_blank">www.aha.org/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further</a></li><li id="fn8">AHA analysis of 2022 Annual Survey data.</li><li id="fn9"><a href="https://www.trillianthealth.com/insights/the-compass/the-total-available-market-of-commercially-insured-patients-is-shrinking" target="_blank">www.trillianthealth.com/insights/the-compass/the-total-available-market-of-commercially-insured-patients-is-shrinking</a></li><li id="fn10"><a href="/news/headline/2024-01-10-aha-infographic-medicare-underpayments-hospitals-nearly-100-billion-2022#:~:text=AHA%20infographic%3A%20Medicare%20underpayments%20to%20hospitals%20nearly%20%24100%20billion%20in%202022,-Jan%2010%2C%202024&text=Medicare%20paid%20hospitals%20a%20record,negative%20Medicare%20margins%20that%20year." target="_blank">www.aha.org/news/headline/2024-01-10-aha-infographic-medicare-underpayments-hospitals-nearly-100-billion-2022#:~:text=AHA%20infographic% 3A%20Medicare%20underpayments%20to%20hospitals%20nearly%20%24100%20billion%20in%202022,-Jan%2010%2C%202024&text=Medicare%20 paid%20hospitals%20a%20record,negative%20Medicare%20margins%20that%20year.</a></li><li id="fn11"><a href="https://www.wsj.com/health/healthcare/health-insurance-cost-increase-5b35ead7" target="_blank">www.wsj.com/health/healthcare/health-insurance-cost-increase-5b35ead7</a></li><li id="fn12"><a href="https://www.mckinsey.com/~/media/mckinsey/industries/healthcare%20systems%20and%20services/our%20insights/administrative%20simplification%20how%20to%20save%20a%20quarter%20trillion%20dollars%20in%20us%20healthcare/administrative-simplification-how-to-save-a-quarter-trillion-dollars-in-us-healthcare.pdf?shouldIndex=false" target="_blank">www.mckinsey.com/~/media/mckinsey/industries/healthcare%20systems%20and%20services/our%20insights/administrative%20simplification%20 how%20to%20save%20a%20quarter%20trillion%20dollars%20in%20us%20healthcare/administrative-simplification-how-to-save-a-quarter-trillion-dollars- in-us-healthcare.pdf?shouldIndex=false</a></li><li id="fn13"><a href="https://premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims" target="_blank">premierinc.com/newsroom/blog/trend-alert-private-payers-retain-profits-by-refusing-or-delaying-legitimate-medical-claims</a></li><li id="fn14"><a href="https://www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf">www.syntellis.com/sites/default/files/2023-11/aha_q2_2023_v2.pdf</a></li><li id="fn15"><a href="https://oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf" target="_blank">oig.hhs.gov/oei/reports/OEI-09-19-00350.pdf</a></li><li id="fn16"><a href="https://oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf" target="_blank">oig.hhs.gov/oei/reports/OEI-09-18-00260.pdf</a></li><li id="fn17"><a href="https://www.ensemblehp.com/blog/the-real-cost-of-medicare-advantage-plan-success/" target="_blank">www.ensemblehp.com/blog/the-real-cost-of-medicare-advantage-plan-success/</a></li><li id="fn18"><a href="https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf#page=401" target="_blank">www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar21_medpac_report_to_the_congress_sec.pdf#page=401</a></li><li id="fn19"><a href="https://www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:- text=authorization’s financial impact-,Prior authorization’s financial impact,an increase of 67%.”" target="_blank">www.ama-assn.org/practice-management/prior-authorization/health-systems-plagued-payer-takeback-schemes-110000#:~:- text=authorization’s%20 financial%20impact-,Prior%20authorization’s%20financial%20impact,an%20increase%20of%2067%25.%E2%80%9D</a></li><li id="fn20">AHA analysis of NHE projections of 2022-2031 expenditures.</li><li id="fn21"><a href="https://www.healthcaredive.com/news/healthcare-ransomware-costs-comparitech-77-billion/698044/" target="_blank">www.healthcaredive.com/news/healthcare-ransomware-costs-comparitech-77-billion/698044/</a></li><li id="fn22"><a href="https://intraprisehealth.com/the-cost-of-cyberattacks-in-healthcare/" target="_blank">intraprisehealth.com/the-cost-of-cyberattacks-in-healthcare/</a></li><li id="fn23"><a href="https://www.healthcareitnews.com/news/cisos-face-budgetary-pressures-burnout-during-global-recession" target="_blank">www.healthcareitnews.com/news/cisos-face-budgetary-pressures-burnout-during-global-recession</a></li><li id="fn24"><a href="https://www.reuters.com/business/healthcare-pharmaceuticals/prices-new-us-drugs-rose-35-2023-more-than-previous-year-2024-02- 23/?utm_source=facebook&utm_medium=news_tab" target="_blank">www.reuters.com/business/healthcare-pharmaceuticals/prices-new-us-drugs-rose-35-2023-more-than-previous-year-2024-02- 23/?utm_source=facebook& utm_medium=news_tab</a></li><li id="fn25"><a href="https://aspe.hhs.gov/reports/changes-list-prices-prescription-drugs" target="_blank">aspe.hhs.gov/reports/changes-list-prices-prescription-drugs</a></li><li id="fn26"><a href="https://www.fda.gov/media/131130/download?attachment" target="_blank">www.fda.gov/media/131130/download?attachment</a></li><li id="fn27"><a href="https://news.ashp.org/-/media/assets/drug-shortages/docs/ASHP-2023-Drug-Shortages-Survey-Report.pdf" target="_blank">news.ashp.org/-/media/assets/drug-shortages/docs/ASHP-2023-Drug-Shortages-Survey-Report.pdf</a></li><li id="fn28"><a href="https://www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/drug-shortages-in-the-us-2023?utm_campaign=2023_ Drug_Shortages_Report_INSTITUTE_IS&utm_medium=email&utm_source=Eloqua" target="_blank">www.iqvia.com/insights/the-iqvia-institute/reports-and-publications/reports/drug-shortages-in-the-us-2023?utm_campaign=2023_ Drug_Shortages_Report_ INSTITUTE_IS&utm_medium=email&utm_source=Eloqua</a></li><li id="fn29"><a href="https://aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs" target="_blank">aspe.hhs.gov/reports/drug-shortages-impacts-consumer-costs</a></li><li id="fn30"><a href="https://link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D." target="_blank">link.springer.com/article/10.1007/s13181-023-00950-6#:~:text=Shortages%20compromise%20or%20delay%20medical,morbidity%20%5B1%2C%202%5D.</a></li><li id="fn31"><a href="/system/files/media/file/2023/06/fact-sheet-examining-the-real-factors-driving-physician-practice-acquisition.pdf" target="_blank">www.aha.org/system/files/media/file/2023/06/fact-sheet-examining-the-real-factors-driving-physician-practice-acquisition.pdf</a></li><li id="fn32"><a href="https://www.mckinsey.com/industries/healthcare/our-insights/how-health-systems-and-educators-can-work-to-close-the-talent-gap" target="_blank">www.mckinsey.com/industries/healthcare/our-insights/how-health-systems-and-educators-can-work-to-close-the-talent-gap</a></li><li id="fn33"><a href="https://www.healthcarefinancenews.com/news/rn-turnover-healthcare-rise" target="_blank">www.healthcarefinancenews.com/news/rn-turnover-healthcare-rise</a></li><li id="fn34"><a href="https://on24static.akamaized.net/event/44/67/84/2/rt/1/documents/resourceList1709062595167/ushealthcaresectorcreditbeat227241709062595167.pdf" target="_blank">on24static.akamaized.net/event/44/67/84/2/rt/1/documents/resourceList1709062595167/ushealthcaresectorcreditbeat227241709062595167.pdf</a></li><li id="fn35"><a href="https://www.spglobal.com/ratings/en/research/articles/231206-historical-peak-of-negative-outlooks-signals-challenges-remain-for-u-s-not- for-profit-acute-health-care-provi-12927513" target="_blank">www.spglobal.com/ratings/en/research/articles/231206-historical-peak-of-negative-outlooks-signals-challenges-remain-for-u-s-not- for-profit-acutehealth- care-provi-12927513</a></li><li id="fn36"><a href="https://www.fitchratings.com/research/us-public-finance/us-not-for-profit-hospitals-health-systems-outlook-2024-05-12-2023" target="_blank">www.fitchratings.com/research/us-public-finance/us-not-for-profit-hospitals-health-systems-outlook-2024-05-12-2023</a></li><li id="fn37"><a href="https://www.kff.org/report-section/medicaid-enrollment-and-unwinding-tracker-overview/" target="_blank">ww.kff.org/report-section/medicaid-enrollment-and-unwinding-tracker-overview/</a></li><li id="fn38"><a href="/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further" target="_blank">www.aha.org/news/blog/2023-09-20-unwise-dsh-cuts-combined-rise-uncompensated-care-due-medicaid-redeterminations-coverage-losses-further</a></li><li id="fn39"><a href="/2024-02-24-update-unitedhealth-groups-change-healthcares-continued-cyberattack-impacting-health-care-providers" target="_blank">www.aha.org/2024-02-24-update-unitedhealth-groups-change-healthcares-continued-cyberattack-impacting-health-care-providers</a></li><li id="fn40"><a href="https://apnews.com/article/hospitals-workplace-violence-shootings-aa6918569ff8f76ff8a15b9813e31686" target="_blank">apnews.com/article/hospitals-workplace-violence-shootings-aa6918569ff8f76ff8a15b9813e31686</a></li></ol></div><div class="col-md-4"><p><a href="/system/files/media/file/2024/05/Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.pdf" target="_blank" title="Click here to download Costs of Caring 2024: America’s Hospitals and Health Systems Continue to Face Escalating Operational Costs and Economic Pressures as They Care for Patients and Communities report PDF."><img src="/sites/default/files/inline-images/Page-1-Americas-Hospitals-and-Health-Systems-Continue-to-Face-Escalating-Operational-Costs-and-Economic-Pressures.png" data-entity-uuid="4315111b-85e5-46dd-9949-8bb4ee5e6246" data-entity-type="file" alt="Costs of Caring 2024: America’s Hospitals and Health Systems Continue to Face Escalating Operational Costs and Economic Pressures as They Care for Patients and Communities page 1." width="695" height="900"></a></p><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-09-10-skyrocketing-hospital-administrative-costs-burdensome-commercial-insurer-policies-are-impacting" target="_blank">View the Skyrocketing Hospital Administrative Costs, Burdensome Commercial Insurer Policies Are Impacting Patient Care Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2024-05-01-2023-costs-caring" target="_blank">View the 2023 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2023-04-20-2022-costs-caring" target="_blank">View the 2022 Costs of Caring Report</a></div><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/guidesreports/2021-10-25-2021-cost-caring" target="_blank">View the 2021 Costs of Caring Report</a></div></div></div></div> Mon, 28 Apr 2025 15:04:37 -0500 Drug Prices /news/headline/2025-04-16-administration-issues-executive-order-prescription-drug-prices-340b-site-neutral-payment <p>The White House April 15 released an <a href="https://www.whitehouse.gov/presidential-actions/2025/04/lowering-drug-prices-by-once-again-putting-americans-first/">executive order</a> directing federal agencies to undertake a broad range of tasks aimed at reducing the costs of prescription drugs.  <br><br>Among the tasks, the order directs:  <br><br>•    The Department of Health and Human Services to ensure within 90 days grants to federally funded health centers are conditioned upon offering insulin and injectable epinephrine at or below the discounted price paid by the health center grantee or sub-grantee under the 340B Prescription Drug Program to eligible patients.  <br>•    HHS to evaluate and propose regulations, as appropriate, within 180 days to ensure payment within Medicare is not encouraging a shift in drug administration volume away from physician office settings to hospital outpatient departments.  <br>•    HHS to carry out within 180 days an acquisition cost survey for covered outpatient drugs at hospital outpatient departments. HHS must then propose any appropriate adjustments consistent with budget neutrality provisions. <br>•    HHS to develop and implement rulemaking within 60 days for a new payment model for high-cost prescription drugs. <br><br>In a statement, Lisa Kidder Hrobsky, AHA senior vice president of advocacy and political affairs, said, “The AHA welcomes President Trump and his Administration focusing on the high price of drugs. As major purchasers of drugs for patient care, hospitals and health systems have strained under their rising prices. <br> <br>“However, we continue to strongly oppose site-neutral policies that do not account for the unique circumstances of providing care in the hospital outpatient setting, where patients are demonstrably sicker and require more complex care. In addition, hospitals and health systems are the providers of 24/7, 365 days a year care to their patients and provide a wide range of services that allow for healthy communities.   <br> <br>“Finally, 340B is an essential program that helps hospitals advance health in communities across the country. We will work closely with the Administration to convey the critical role 340B plays for patients and communities, especially those in rural and other medically underserved areas.”</p> Wed, 16 Apr 2025 16:01:24 -0500 Drug Prices <div class="container"><div class="row"><div class="col-md-8"><p>The White House April 15 released an <a href="https://www.whitehouse.gov/presidential-actions/2025/04/lowering-drug-prices-by-once-again-putting-americans-first/" target="_blank">executive order</a>, “Lowering Drug Prices by Once Again Putting Americans First,” directing federal agencies to undertake a broad range of tasks aimed at reducing the costs of prescription drugs.</p><p>Specifically, the order directs:</p><ul><li>The Secretary of Health and Human Services (HHS) to ensure within 90 days grants to federally funded health centers are conditioned upon offering insulin and injectable epinephrine at or below the discounted price paid by the health center grantee or sub-grantee under the 340B Prescription Drug Program to eligible patients.</li><li>HHS to evaluate and propose regulations, as appropriate, within 180 days to ensure payment within Medicare is not encouraging a shift in drug administration volume away from physician office settings to hospital outpatient departments.</li><li>HHS to carry out within 180 days an acquisition cost survey for covered outpatient drugs at hospital outpatient departments. HHS must then propose any appropriate adjustments consistent with budget neutrality provisions.</li><li>HHS to develop and implement rulemaking within 60 days for a new payment model for high-cost prescription drugs.</li><li>HHS to propose and issue guidance within 60 days to improve the transparency of the Medicare Drug Price Negotiation Program, prioritize the selection of prescription drugs that are high cost to Medicare, and minimize any negative impacts of the maximum fair price on pharmaceutical innovation to the U.S. Additionally, the order directs HHS to work with Congress to modify the Medicare Drug Price Negotiation Program to extend the protection of small molecule prescription drugs from price negotiation to align with that of biological products.</li><li>The Office of Management and Budget Director (OMB), Assistant to the President for Domestic Policy, and the Assistant to the President for Economic Policy, in coordination with HHS, to jointly provide recommendations to the president within 180 days on how best to ensure that manufacturers pay accurate Medicaid drug rebates and support states in managing drug spending.</li><li>The Assistant to the President for Domestic Policy to provide within 90 days recommendations to the president on how best to promote a more competitive, efficient, transparent and resilient pharmaceutical value chain.</li><li>HHS to issue a report within 180 days providing administrative and legislative recommendations to 1) accelerate the approval of generics, biosimilars, combination products and second-in-class brand name medications; and 2) improve the process through which prescription drugs can be reclassified as over-the-counter medications.</li><li>HHS to take steps within 180 days to streamline and improve the Importation Program under the Federal Food, Drug, and Cosmetic Act to make it easier for states to obtain approval without sacrificing safety or quality.</li><li>The Secretary of Labor to propose regulations within 180 days to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers.</li><li>HHS to host public listening sessions and issue a report within 180 days with recommendations to reduce anti-competitive behavior by pharmaceutical manufacturers.</li></ul><p>Additional information will be forthcoming as agencies issue related guidance or notices.</p><h2>AHA TAKE</h2><p>In a statement shared with media, Lisa Kidder Hrobsky, AHA senior vice president of federal relations, advocacy, and political affairs, said, "The AHA welcomes President Trump and his administration focusing on the high price of drugs. As major purchasers of drugs for patient care, hospitals and health systems have strained under their rising prices. However, we continue to strongly oppose site-neutral policies that do not account for the unique circumstances of providing care in the hospital outpatient setting, where patients are demonstrably sicker and require more complex care. In addition, hospitals and health systems are the providers of 24/7, 365 days a year care to their patients and provide a wide range of services that allow for healthy communities. Finally, 340B is an essential program that helps hospitals advance health in communities across the country. We will work closely with the administration to convey the critical role 340B plays for patients and communities, especially those in rural and other medically underserved areas."</p><h2>ADDITIONAL INFORMATION ON EXECUTIVE ACTIONS</h2><p>The Trump administration has issued many executive orders and taken other administrative actions. The AHA has compiled a <a href="/system/files/media/file/2025/01/2025-New-Executive-Orders-20250127.pdf">tracker</a> of the actions the administration has taken that may be of interest to hospitals and health systems. The tracker will be updated regularly as new actions are taken.</p><h2>FURTHER QUESTIONS</h2><p>If you have further questions, please contact the AHA at 800-424-4301.</p></div><div class="col-md-4"><p><a href="/system/files/media/file/2025/04/trump-administration-issues-order-on-drug-pricing-advisory-4-16-2025.pdf" target="_blank" title="Click here to download the Member Advisory: Trump Administration Issues Additional Deregulation Orders and Notices PDF."><img src="/sites/default/files/2025-04/cover-trump-administration-issues-order-on-drug-pricing-advisory-4-16-2025.png" data-entity-uuid data-entity-type="file" alt="Cover Image Member Advisory: Trump Administration Issues Order on Drug Pricing." width="695" height="906"></a></p></div></div></div> Wed, 16 Apr 2025 15:34:42 -0500 Drug Prices /news/headline/2025-04-15-commerce-department-investigate-imports-pharmaceuticals-semiconductors <p>The Department of Commerce yesterday released notices announcing national security investigations on imports of <a href="https://www.federalregister.gov/public-inspection/2025-06587/national-security-investigation-of-imports-of-pharmaceuticals-and-pharmaceutical-ingredients" title="pharma imports">pharmaceuticals, pharmaceutical ingredients</a> and <a href="https://www.federalregister.gov/public-inspection/2025-06591/national-security-investigation-of-imports-of-semiconductors-and-semiconductor-manufacturing" title="semi imports">semiconductors</a>. The investigations are being conducted under Section 232 of the Trade Expansion Act of 1962, which authorizes the President to impose tariffs or other trade restrictions if an investigation determines that importation of particular goods affect national security. Those goods have received exemptions from tariffs on imported goods that began April 5. The agency will accept comments on domestic production, the role of foreign supply chains, the impacts of trade policy and other information related to pharmaceutical and semiconductor imports for 21 days following publication in the April 16 Federal Register. </p> Tue, 15 Apr 2025 14:56:01 -0500 Drug Prices /news/headline/2025-03-04-aha-files-amicus-brief-4th-circuit-support-maryland-340b-contract-pharmacy-law <p>The AHA Feb. 28 filed a <a href="/amicus-brief/2025-02-28-aha-others-file-amicus-brief-fourth-circuit-support-maryland-340b-contract-pharmacy-law" title="FOC brief">friend-of-the-court brief</a> in the U.S. Court of Appeals for the 4th Circuit, urging the court to affirm a decision by the U.S. District Court for the District of Maryland in <a href="/news/headline/2024-09-09-report-district-court-denies-preliminary-injunction-upholding-maryland-law-protecting-340b-pricing" title="injunction">September</a> to deny a preliminary injunction sought by drug companies and PhRMA against enforcement of Maryland's state law protecting 340B pricing for contract pharmacy arrangements.  </p><p>The AHA also filed amicus briefs in the district court in <a href="/system/files/media/file/2024/09/aha-others-unopposed-motion-to-file-oversize-amicus-brief-in-support-of-defendants-motion-to-dismiss-and-opposition-to-plaintiffs-motion-for-preliminary-injunction-7-29-2024.pdf" title="July brief">July</a> and <a href="/system/files/media/file/2024/09/aha-othe-aha-others-consent-motion-to-file-amicus-brief-in-support-of-defendant%E2%80%99s-motion-to-dismiss-8-2-2024.pdf" title="August brief">August</a>, defending Maryland’s law against drug industry efforts to enjoin it.  </p><p>Others joining AHA in the Feb. 28 filing were 340B Health, the Maryland Hospital Association, the Mid-Atlantic Association of Community Health Centers and the American Society of Health-System Pharmacists. </p> Tue, 04 Mar 2025 15:08:49 -0600 Drug Prices /aha-center-health-innovation-market-scan/2025-02-25-rfid-solutions-attract-attention-medication-inventory-management <div class="container"><div class="row"><div class="col-md-8"><img src="/sites/default/files/inline-images/RFID-Solutions-Attract-Attention-for-Medication-Inventory-Management.png" data-entity-uuid="fcef64bf-69db-4b66-b257-90a786729d38" data-entity-type="file" alt="RFID Solutions Attract Attention for Medication Inventory Management. A radio frequency identification (RFID) system tag surround by drug capsules." width="100%" height="100%"><p>Using radio frequency identification (RFID) systems to track hospital and health system assets, including equipment and staff, have long been in use. But it appears that more organizations are giving RFID a second look to aid in medication management accuracy, safety and efficiency.</p><p>Recent reports note that UF Health Shands, a private, not-for-profit hospital in Gainesville, Florida, has been using an <a href="https://www.healthcareitnews.com/news/rfid-brings-inpatient-medication-management-home-settings" target="_blank" title="HIMSS: RFID brings inpatient medication management to home settings">RFID solution</a> for three years to help the pharmacy team manage crash cart trays. Meanwhile, Texas Children’s Hospital in Houston has been using <a href="https://www.healthcareitnews.com/news/novel-rfid-solution-elevates-drug-inventory-management" target="_blank" title="HIMSS: A novel RFID solution elevates drug inventory management">RFID solutions for drug kits, trays and airway boxes</a> for several years to streamline the refilling process.</p><p>RFID systems augment and improve a historically barcode-driven workflow by utilizing the technology’s power to read large numbers of drugs during a single scan — in real time, wirelessly. This can make it is easier and faster to determine what drugs may need to be restocked or removed due to expiration. RFID also can eliminate manual entry of lot numbers and expiration dates while accelerating the recall process, which saves many hours of often tedious work, advocates say.</p><p>Still, making the conversion to RFID tracking of medications has its own set of labor-intensive considerations.</p><h2>Evaluate Tagging Considerations</h2><p>To use RFID-enabled medication systems, each medication needs to be RFID tagged, notes a <a href="https://www.pharmaceuticalcommerce.com/view/the-promise-of-rfid-for-improving-medication-inventory-management" target="_blank" title="Pharmaceutical Commerce: The Promise of RFID for Improving Medication Inventory Management">Pharmaceutical Commerce report</a>. This typically requires pharmacy personnel to place a vendor-provided RFID tag onto individual products, associate the drug information to the tag and then double-check the tags to ensure accuracy.</p><p>Tag placement also can be important since the tags must be affixed in the right location to avoid obscuring the medication label. Many hospitals have job aids to direct pharmacy personnel where and how to affix tags, especially on difficult-to-read products.</p><p>While it may be a lot of work, for many facilities the benefits in terms of accuracy and efficiency outweigh this tedious task. For others, however, the labor required to tag the number of products required may dissuade them from adopting RFID.</p><p>UF Health Shands opted in favor of an RFID solution to support its emergency department, pharmacy and hospital-at-home program that launched in 2024. Rubaiyat Zinat, pharmacist coordinator for adult medicine pharmacy services at UF Health Shands, is hopeful that RFID’s use will expand to hospital operating rooms and anesthesia workstations. The ability to use drugs pre-tagged by pharmaceutical manufacturers would further simplify medication management workflows, saving her team time and frustration, she told Healthcare IT News.</p><p>After determining that its health system regularly uses 784 high-value and specialty drugs that cost $100 or more per unit, Texas Children’s worked on developing a new type of RFID system to track these items.</p><p>It focused on more efficiently tagging each medication, taking an onerous 12-step process that was fraught with the potential for human error to a simpler two-step workflow. In the new workflow, a pharmacy tech scans the high-value drug to generate a label with all pertinent information that is applied to a box. That box is associated only with that unique medication. The box then moves to a conditioning station where the technician scans the already validated drug label and applies an RFID tag to each unit within the box.</p><p>This process has eliminated the need for manual data entry, with each drug associated with a specific RFID location, such as a cabinet or refrigerator. This validates that the drug is the right product, that it’s going to the right location and that the RFID tag is working before it gets there.</p></div><div class="col-md-4"><p><a href="/center" title="Visit the AHA Center for Health Innovation landing page."><img src="/sites/default/files/inline-images/logo-aha-innovation-center-color-sm.jpg" data-entity-uuid="7ade6b12-de98-4d0b-965f-a7c99d9463c5" alt="AHA Center for Health Innovation logo" width="721" height="130" data-entity- type="file" class="align-center"></a></p><p><a href="/center/form/innovation-subscription"><img src="/sites/default/files/2019-04/Market_Scan_Call_Out_360x300.png" data-entity-uuid data-entity-type alt width="360" height="300"></a></p></div></div></div>.field_featured_image { position: absolute; overflow: hidden; clip: rect(0 0 0 0); height: 1px; width: 1px; margin: -1px; padding: 0; border: 0; } .featured-image{ position: absolute; overflow: hidden; clip: rect(0 0 0 0); height: 1px; width: 1px; margin: -1px; padding: 0; border: 0; } h2 { color: #9d2235; } Tue, 25 Feb 2025 06:00:00 -0600 Drug Prices /lettercomment/2025-02-05-aha-urges-administration-grant-exceptions-tariffs-medications-and-medical-supplies <div class="container"><div class="row"><div class="col-md-8"><p>February 4, 2025</p><p>The Honorable Donald J. Trump<br>President of the United States of America<br>White House<br>1600 Pennsylvania Avenue<br>Washington, D.C. 20500</p><p>Dear President Trump:</p><p>America's hospitals stand with you in seeking ways to prevent the ravages of illicit drug use in this country. Every day, the doctors, nurses and other caregivers in our hospitals and health systems treat those suffering from addiction. They work tirelessly to prevent deaths from overdoses of fentanyl and other addictive drugs. We commend your focus on this issue in the first few days of your second term. We are, however, concerned that the approach of using tariffs may inadvertently put others' lives at risk by jeopardizing the availability of vital medications and essential health care devices.</p><p>We ask that you consider granting exceptions to the current and proposed tariffs for medical devices and pharmaceuticals made in Mexico, Canada and China that are essential to the provision of safe, effective care in America's hospitals, clinics, and other settings. It is especially critical to have these exceptions for products already in shortage and for which production in the countries subject to increased tariffs supply a significant part of the U.S. market. We are aware, since the announcement of the potential tariffs, conversations with the leaders of Canada and Mexico led to a delay in the imposition of tariffs on products made in those countries, but we believe the principle still prevails.</p><p>Despite ongoing efforts to build the domestic supply chain, the U.S. health care system relies significantly on international sources for many drugs and devices needed to both care for patients and protect our health care workers. Tariffs, as well as any reaction of the countries on whom such tariffs are imposed, could reduce the availability of these life-saving medications and supplies in the U.S. For example, U.S. providers import many cancer and cardiovascular medications, immunosuppressives, antibiotics and combination antibiotics from China. For many patients, even a temporary disruption in their access to these needed medications could put them at significant risk of harm, including death. Carefully planned chemotherapy treatments and antibiotic schedules are essential to giving patients the best chance of overcoming their disease. Similarly, the provision of necessary cardiovascular medications must be continuous to preserve their cardiovascular health.</p><p>Beyond the use of these finished products, many raw ingredients for pharmaceuticals come from China. These are commonly known as active pharmaceutical ingredients (APls). These chemicals are the most important components of any pharmaceutical manufacturer's supply chain. The U.S. gets nearly 30% of its APls from China, meaning that these tariffs may also limit the availability of U.S. drug manufacturers to produce critical drugs here in the U.S.<a href="#fn1"><sup>1</sup></a></p><p>China is also the source of many medical devices. Some of these devices are single­ use devices designed to protect the patient from infection, such as single-use blood pressure cuffs, stethoscope covers and sterile drapes. Others are small devices used ubiquitously in hospitals, such as anesthesia instruments, cautery pencils, needles and syringes, pulse oximeters and blood pressure cuffs. Disruption in the availability of these instruments would curtail hospitals' ability to perform life-saving surgeries and keep patients safe from contagion and greatly reduce our ability to effectively diagnose and monitor patient conditions.</p><p>Finally, the protection of our health care workers from infectious diseases is vital to their health and the ability of the health care system to continue caring for patients. Health care workers need gowns, gloves, face masks, respirators and other equipment, much of which is manufactured in China and cannot be easily replaced by domestic manufacturers. In 2023, Chinese manufacturers provided the majority of the N95 and other respirators used in health care. Additionally, China was the source for one-third of the disposable face masks, two-thirds of the non-disposable face masks, and 94% of the plastic gloves used in health care.<a href="#fn2"><sup>2</sup></a> The lack of this essential equipment will not only put patients at risk but also threaten our health care delivery personnel.</p><p>Thank you for your consideration of our concerns on this important matter. We welcome the opportunity to discuss how to preserve access to essential pharmaceuticals and devices with your team. Please feel free to have your designee contact me or Nancy Foster, AHA vice president for quality and patient safety policy, at 202-626-2337 or nfoster@aha.org.</p><p>Sincerely,</p><p>/s/</p><p>Richard J. Pollack<br>President and Chief Executive Officer</p><hr><ol><li id="fn1">Neils Graham, Atlantic Council, April 19, 2023; The US is relying more on China for pharmaceuticals and vice versa.</li><li id="fn2">AdvaMed presentation 2023</li></ol></div><div class="col-md-4"><div class="external-link spacer"><a class="btn btn-wide btn-primary" href="/system/files/media/file/2025/02/AHA-Urges-Administration-to-Grant-Exceptions-for-Tariffs-for-Medications-and-Medical-Supplies.pdf" target="_blank" title="Click here to download the AHA Urges Administration to Grant Exceptions for Tariffs for Medications and Medical Supplies letter PDF.">Download the letter PDF</a></div><p><a href="/system/files/media/file/2025/02/AHA-Urges-Administration-to-Grant-Exceptions-for-Tariffs-for-Medications-and-Medical-Supplies.pdf" target="_blank" title="Click here to download the AHA Urges Administration to Grant Exceptions for Tariffs for Medications and Medical Supplies letter PDF."><img src="/sites/default/files/inline-images/Page-1-AHA-Urges-Administration-to-Grant-Exceptions-for-Tariffs-for-Medications-and-Medical-Supplies-letter.png" data-entity-uuid="7b65288a-4404-46df-a4d2-2055dbbc12b4" data-entity-type="file" alt="AHA Urges Administration to Grant Exceptions for Tariffs for Medications and Medical Supplies letter page 1." width="695" height="900"></a></p></div></div></div> Wed, 05 Feb 2025 07:54:44 -0600 Drug Prices /fact-sheets/2020-10-06-fact-sheet-340b-drug-pricing-program-contract-pharmacy-arrangements <div class="container"><div class="row"><div class="col-md-8"><p><span><strong>Section 340B of the Public Health Service Act requires pharmaceutical manufacturers participating in Medicaid to sell outpatient drugs at discounted prices to health care organizations that care for patients in vulnerable communities.</strong></span><strong> </strong>These organizations, called “covered entities,” include public and nonprofit disproportionate share hospitals, children’s hospitals, critical access hospitals, sole community hospitals, rural referral centers and federal grantee programs.</p><p>The program allows eligible hospitals to stretch limited federal resources to provide more affordable and comprehensive health care services and expand its reach to serve more patients and communities. Hospitals use 340B savings in many ways based on the unique needs of the populations they serve. Some examples include providing free care for uninsured patients, offering free or discounted drugs, providing behavioral health services, and implementing, for example, medication management and community health programs, among other community- focused services and programs.</p><p>In light of the mission of the 340B program to ensure more patients have access to care, the Health Resources and Services Administration (HRSA) allows covered entities the ability to contract with community and specialty pharmacies to dispense drugs on their behalf to their eligible patients. Contract pharmacies serve as an extension of the 340B provider and allow patients access to their prescribed drug treatments in the convenience of their local community pharmacy or through the mail (i.e., mail-order pharmacy). For hospitals, these arrangements allow them to ensure that their patients can access the drugs they need when they need it, especially as patients rely more heavily on specialty drugs many of which are in limited distribution. For patients, these arrangements make it easier to access their needed drugs without having to travel to the hospital to receive the drug. The 340B savings generated from these arrangements allow the hospital to better serve their vulnerable communities by increasing access to more affordable health care services. Despite these benefits to patients and providers, several drug companies have taken unprecedented and unlawful actions to limit or deny access to 340B pricing through these contract arrangements with community and specialty pharmacies. The Department of Health and Human Services (HHS) has referred several companies to the Office of the Inspector General for violating the law, for which the drug companies have litigated and is currently pending resolution in the Federal Appeals Court. Meanwhile, several states have introduced or passed legislation that would prohibit drug companies from denying 340B discounts through contract pharmacy arrangements.</p><h2><span>Key Facts</span></h2><ul><li>The drug companies’ abusive tactics are negatively impacting 340B hospitals’ ability to stretch their scarce resources to provide more affordable access to care and must end immediately. A 2022 AHA survey found that these actions are resulting in over $500 thousand in average annual losses to critical access hospitals, while DSH hospitals are losing an average of nearly $3 million every year. As more drug companies impose more restrictions, these losses are exponentially increasing, with many reporting tens of millions in losses.</li><li>The 340B statute is clear — drug manufacturers must provide 340B pricing to eligible hospitals for any covered outpatient drug regardless of where or how that drug is dispensed, as long as that drug is dispensed to an eligible patient.</li><li>HRSA, in its oversight of the 340B program, established and then expanded the use of contract pharmacies, recognizing the value of contract pharmacies to improve access to 340B drugs for vulnerable patients and communities.</li><li>Contract pharmacies are particularly important in rural hospitals, many of which do not have their own in-house pharmacies, and therefore solely rely on a network of contracted community and specialty pharmacies to ensure their patients have access to the drugs they need. Approximately half of all eligible 340B hospitals are located in rural areas that often lack adequate access to health care services. More than 80% of rural 340B hospitals use contract pharmacies to ensure their patients have access to needed outpatient drugs, as well as other essential services.</li><li>Contract pharmacies allow all hospitals to ensure access to a wide range of 340B drugs for their patients. For hospitals that do have their own in-house pharmacy, they are unable to stock every drug that a patient could possibly need, especially since many specialty drugs are in limited distribution and unavailable to keep in continuous inventory. Having these contractual relationships with external pharmacies allows the hospital to provide the patient with a needed drug, even if the hospital’s pharmacy does not inventory that drug. Not only does the patient benefit in such an instance, but allowing access to the drug in a more convenient manner to the patient at their local community pharmacy helps ensure better compliance with prescribed treatments.</li><li>HRSA conducts 200 annual audits of covered entities, a great majority of which are for hospitals, to ensure they are complying with 340B rules and regulations. These rigorous audits ensure that 340B drugs are being given only to eligible patients, and that covered entities are not receiving both a 340B discount and a Medicaid rebate for the same drug (duplicate discount). In addition, many covered entities conduct self-audits of their programs to ensure they are in compliance with program rules.</li></ul><h2><span>Why?</span></h2><ul><li><span><strong>Access to the 340B program is more important than ever.</strong></span> A 2023 report by HHS’ Office of the Assistant Secretary for Planning and Evaluation showed that nearly 2,000 drugs had experienced price increases greater than inflation, with an average price increase of 15.2%. Hospitals need access to the 340B program to ensure that they can maintain access to health care services for their patients in the face of these high and rising costs.</li><li><span><strong>States should continue to pursue legislation that prohibits drug company restrictions on contract pharmacy.</strong></span> As of January 2025, eight states (Arkansas, Louisiana, Minnesota, Missouri, Maryland, West Virginia, Kansas and Mississippi) have passed laws prohibiting drug companies from imposing restrictions on access to 340B. Most of these laws have been upheld by state and federal courts and several drug companies have restored access to 340B pricing through contract pharmacies as a result. Nearly 20 other states are actively considering legislation, with five of those states (Utah, Kentucky, New Mexico, New York and Nebraska) already introducing legislation as of January 2025. </li><li><span><strong>HHS must use all available tools to halt drug company actions that undermine the program.</strong></span> Even as the courts have wrongly narrowed HHS’s authority to penalize drug companies for their contract pharmacy restrictions, they have made clear that certain drug company conditions “might violate the [340B] statute.” We encourage HHS to use the full extent of its authority to penalize drug companies when they violate the statute.</li></ul><p> </p></div><div class="col-md-4"><a href="/system/files/media/file/2020/10/fact-sheet-340b-drug-pricing-program-contract-pharmacy-arrangements.pdf"><img src="/sites/default/files/inline-images/cover-fact-sheet-340b-drug-pricing-program-contract-pharmacy-arrangements-1-2025-680px.png" data-entity-uuid="0bfaadd9-a74c-4785-86e2-ac7442d1130e" data-entity-type="file" alt="Image of Fact Sheet Cover" width="682" height="882"></a><p><strong> </strong></p></div></div></div> Wed, 29 Jan 2025 11:58:00 -0600 Drug Prices /news/headline/2025-01-24-senate-introduces-bill-requiring-price-disclosures-advertisements-prescription-drugs <p>Sens. Dick Durbin, D-Ill., and Chuck Grassley, R-Iowa, Jan. 23 <a href="https://www.durbin.senate.gov/newsroom/press-releases/durbin-grassley-introduce-bill-to-crack-down-on-prescription-drug-advertisements-boost-price-transparency">introduced</a> the Drug-price Transparency for Consumers Act, legislation supported by the AHA that would require price disclosures on advertisements for prescription drugs. The bill would help ensure that consumers are able to make more informed decisions on prescription drugs. </p> Fri, 24 Jan 2025 13:19:12 -0600 Drug Prices