Yale New Haven Health faces first deficit in 50 years
As the Yale New Haven Health System faces its first financial deficit in 50 years, administrators and healthcare experts debate the causes and effects of the financial losses and how the health system aims to respond.
Following the worst fiscal year the Yale New Haven Health System has ever seen, the hospital system budgeted for a $250 million deficit for fiscal year 2023.
Last year, the YNHHS, which formed in 1995, lost $240 million. For Yale New Haven Hospital specifically, this was the first financial loss in the past 50 years, hurling Connecticut’s largest healthcare system into a fiscal crisis. The deficit also forced the YNHHS to cut 155 administrative positions in New Haven, which included firing 72 hospital managers.
“It was an extraordinarily difficult day, especially for those impacted, and it’s not something we’ve done before as a health system,” former YNHHS Vice President Vin Petrini told the News in September. “I’ve been here nearly 20 years, and I’ve never experienced that before.”
With the deficit projected to continue into fiscal year 2023, YNHHS administrators and health policy experts discussed the possible factors leading to the deficit, how the deficit has already impacted the YNHHS and what the deficit means for its future.
What caused this unprecedented deficit?
On March 7, the Connecticut Hospital Association, which represents health systems and 27 acute care hospitals across the state, released a report on the impact the COVID-19 pandemic had on the financial health of the hospitals they represent. Across Connecticut hospitals, the median operating margin dropped nearly 67 percent from pre-pandemic levels.
Healthcare experts and hospital representatives were generally in agreement that the COVID-19 pandemic was the main culprit of these unprecedented financial losses for the YNHHS and other Connecticut healthcare providers including Trinity Health and Hartford HealthCare.
Paul Kidwell, Connecticut Health Association senior vice president of policy, also cited decreases in federal relief funds given to the healthcare systems as contributing to smaller operational margins in 2023. Trinity Health, for example, went from receiving $618 million from the federal Provider Relief Fund in 2021 to $141 million in 2022.
The Connecticut Health Association argued that under-reimbursement for Medicaid and Medicare, rapid inflation and increasing costs of temporary labor contracted by hospitals were also to blame. Dana Marnane, YNHHS director of public relations and communications, echoed this sentiment in an interview with the News in March. She also added that another the hospital is facing a historic deficit might be due to increases in the average amount of time patients stay in the hospital and in the complexity of their conditions, which may have resulted from not seeking treatment during the pandemic.
However, not all health policy experts agree with the factors mentioned by YNHHS and other large healthcare systems. Poor returns on investments during the nationwide economic decline in 2022 might be one of the largest contributors to these health systems’ financial losses, according to one study published this spring.
Ted Doolittle, Connecticut’s appointed state healthcare advocate, fought back against hospital administrators’ claims that healthcare systems were plunging into deficits because of under-reimbursement for Medicaid and Medicare. Under Medicare, Doolittle explained to the News in November, it is easier for hospitals with an above-average efficiency to make a profit, sometimes leaving less efficient hospitals behind.
“Everyone has been terribly impacted by the pandemic, at historic inflation, rising costs for premium labor and the expiration of the CARES Act funding,” Petrini said, aligning with the claims made by the Connecticut Health Association. “[I]t’s put a lot of health systems in a very difficult position.”
What has YNHHS done to combat the deficit?
In attempting to mitigate the effects of the deficit, YNHHS officials have said that their primary goal is to avoid reducing the quality of patient care. However, other large Connecticut healthcare systems also experiencing deficits, such as Trinity Health, have hinted at future cuts to programs and initiatives if the deficit were to progress. No such changes have occurred yet.
“Ultimately … we will be forced to look at programs and offerings and initiatives that we’re currently able to offer to the community and say, ‘Okay, what can we not offer?’ Because we can’t continue running in the red,” Syed Hussain, Trinity Health chief clinical officer, said.
In preparation for the financial losses projected to occur in fiscal year 2023, the Yale New Haven Hospital laid off 72 hospital managers and eliminated 83 vacant positions at both junior and senior levels of its administration in September 2022. While this would lead to restructuring of responsibilities, Petrini explained, none of the cuts would “impact frontline and caregiver employees,” nor were they “patient-facing,” meaning patient care, in theory, would remain unaffected. In addition, Marnane noted that the hospital plans to reduce the number of more expensive temporary employees such as traveling nurses.
Despite its deficit and ongoing layoffs, the YNHHS applied to acquire three new Connecticut Hospitals in a $400 million deal this fall. The hospitals include the Rockville General Hospital in Vernon, Manchester Memorial Hospital, and Waterbury Hospital. Upon acquiring these new facilities, the YNHHS would gain more than 700 new beds and about 4,400 additional employees. The deal still must be approved through the state’s Certificate of Need process.
The endeavor concerned state health advocates, including AFT Connecticut Vice President John Brady, who spoke to the News in November regarding the labor federation’s worries over the socioeconomic impact of continued mergers between independent hospitals and Connecticut healthcare systems.
“Consolidation of healthcare systems worries us,” said Brady. “Both because it decreases competition, which leads to increased costs for residents, but also it decreases services … as hospitals take over several hospitals, they have a tendency to eliminate one service or another at some of their hospitals to consolidate them.”
Petrini defended the acquisition, referring to the health system’s continuing need to invest in its own future and the futures of its patients, even in the face of financial losses.
In recent years, according to Petrini, the YNHHS has noted capacity issues and increased demand for services at facilities such as the Bridgeport Hospital, which merged with the YNHHS in 2019. Acquiring the three new hospitals, he maintained, would allow for these issues to be remedied and for an increase in quality of care, access to services and convenience for patients, thanks to the integration of medical records across YNHHS.
But Doolittle disagreed with Petrini’s claims, citing research that has demonstrated patterns opposite to the potential benefits Petrini promoted.
“Overall, it could be good, but it’s probably more likely to be a net negative for the families in the state,” Doolittle told the News in October. “I say that because the research pretty clearly shows that when hospitals do merge and expand, the end result is that the prices paid by consumers and families and insurance companies tend to go up.”
Where will YNHHS go from here?
If the deficit were to progress further, there could be future cuts to hospital programs, argued Trinity Health’s Syed Hussain. These programmatic changes would impact the availability of healthcare to different regions and communities across the state. In hopes of preventing this problem, she said that Trinity Health has recently made investments in increasing workforce recruitment and retention, including developing new forms of healthcare delivery and creating recruitment partnerships with local schools. If successful, these endeavors could act as a model for YNHHS, whose flagship location in New Haven is surrounded by multiple colleges and K-12 schools.
In preparation for the anticipated 2023 deficit and in light of current staffing shortages, YNHHS administrators wrote to the News in March that they have put a significant effort towards “recruitment and retention.” However, they have not noted any changes made to their regular operations that directly resulted from the deficit.
Hussain said that Trinity Health is committed to ensuring that Connecticut communities will still benefit from the services provided by organizations like Trinity Health.
“We need all folks at the table to be able to ensure that we’re able to continue to invest in our healthcare systems and services and programs that ultimately benefit the community,” Hussain stated.
Yale New Haven Hospital is located at 20 York St.