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Bridging the Funding Gap in Healthcare

July 24, 2023

We are now three years out from the start of the pandemic, but the healthcare industry is still actively struggling with the financial consequences. As seen by nearly all industries over the last few years, staffing has been a huge challenge, inflation has been consistently increasing prices for goods of all kinds, and supply chains are just now starting to return to normal.

So, what got us here, what effect has this financial crisis had on healthcare organizations, how will that affect local communities, and what can our team do to help?


Since the beginning of the pandemic, many healthcare workers have left the field of turned to contract work (such as traveling nurses), resulting in healthcare organizations searching for employees at exponential costs. To continue providing services and keeping beds available for their patients, most healthcare organizations increased wages and benefits for their contracted employees, along with complying with raised rates for agency employees. According to Kaufman Hall, 2022’s reported contract labor expenses were approximately 500% higher than they were pre-pandemic and expenses for full-time equivalents for hospital contact employees jumped more than 138%. This is an unsustainable increase as labor costs account for more than half of most hospitals’ total expenses. It was reported that labor expenses for healthcare organizations increased by 24.7% per patient.

Looking ahead over the next five years, the U.S. is projected to face a shortage of more than 3.2 million low-wage healthcare workers including essential positions like medical assistants, home health aides, nursing assistants, and more. New York State is projected to have the highest shortage of low-wage healthcare workers, with a projection to fall short by nearly 675,000 workers by 2026. Healthcare organizations will need to invest highly in their workforce and talent pipeline to ensure they can supply the necessary beds, services, and care for their community’s needs.

Rising Expenses and Decreasing Margins

In addition to the aggressive increases in staff pay, there have been notable increases in the expenses for supplies, personal protection equipment, technology, and pharmaceuticals. While this inflationary trend continues, these organizations can expect to lose billions to increased pricing. McKinsey reported that the impact of inflation on healthcare systems could be projected to be just under $100 billion in additional costs between 2022 and 2023, showing a $248 billion increase compared to 2019.

For 2022, margins were predicted to be down at least 37% with a possibility of being 133% lower compared to pre-pandemic levels. 2022 had consistently negative operating margins due to low patient volumes, decreases in revenue, and high expenses. Furthermore, 50% to 65% of hospitals were predicted to operate in the red for 2022, with continued negative margins seen in the first few months of 2023. Moving into 2023, only 7% of health system leaders think inflation and affordability will not impact their strategies, while 76% think it will have a significant impact on their yearly strategies.

Although these organizations are facing immense cost increases, hospital rates have only increased slightly. In 2022, hospital prices grew by 2.9%, while general inflation was seen at 8%.

Consequences of Rising Costs

The results of rising costs in partnership with other external issues such as the aging population, the rise in chronic diseases, and lacking workforce pipeline could be catastrophic to hospitals, healthcare systems, and local communities. Communities at large are at risk of losing their access to quality healthcare if the funding crisis isn’t resolved. For example, the state of Michigan has already lost nearly 2,000 staffed hospital beds since the pandemic began. With few resources, the results can range from longer emergency room wait times, to reduced services, difficulty transferring patients, inability to find the right care setting for patients, or more acquisitions or closures of hospitals and health systems. In the first quarter of 2023, the highest number of bond defaults among hospitals was seen in over a decade. Hospitals in rural areas have been hit especially hard. Since 2010, 143 rural hospitals have closed, with 19 of those occurring in 2020.

Capital Campaigns and Annual Campaigns Can Bridge the Gap

One way our team can help healthcare organizations struggling financially is through a capital campaign comprised of a targeted fundraising effort with a set goal or timeline. Capital campaigns are utilized for a specific purpose such as acquiring or renovating a facility, purchasing expensive equipment, or building an endowment. While these types of campaigns do not always assist with ongoing operating expenses, they do help achieve organizational goals along with increasing the visibility of foundations, missions, and projects.

Our team partnered with ECMC for the “No Giving Up” capital campaign, which helped gain support and progress for the opening of the new, state-of-the-art Trauma Center and Emergency Department. ECMC gained the attention of potential donors through sharing the organization’s current struggles, both internally for the team and externally for patients, along with how the support of donors contributed to the development of the facility and the level of care provided in the busiest trauma center and emergency department in WNY.

If your organization is concerned about combating the current financial crisis affecting your operational costs, an annual giving campaign may be a better fit for your team. This type of campaign can run without a set goal or timeline; instead, the outcome is to offset the increasing prices and financial pressure put on the organization. Annual giving campaigns or annual funds help tell employee, patient, and community stories to show the impact your organization has each and every day on the local area.

Another example of our work is the award-winning campaign for the Patricia Allen Fund that benefits Oishei Children’s Hospital. This campaign began as a way to commemorate Patricia Allen, the Buffalo Bills’ quarterback’s late grandmother, through $17 donations, but has turned into a major fund that has consistently assisted the hospital’s operation over the past three years. The impact of this campaign is so large, there is now an Oishei hospital wing dedicated to Patricia Allen.

All in all, we can partner with your team to help broadcast the goals of your organization through a campaign, along with sharing the gravity of the current financial crisis. Our team can also advise you on the appropriate campaign type, target audience, and proper media tactics to gather much-needed support from your local community. Let us help you show the possible consequences if this issue is not dealt with, such as removing staffed beds, laying off employees, or even closing facilities. What services are at risk? How will those losses affect individuals? What can donations do to prevent that?

Healthcare is a huge provider of services, jobs, and other support to the communities in which they serve. We can help your healthcare organization share that message and gather the needed financial support to weather these challenging times.  

If you’re interested in hearing more about our healthcare experience, please contact VP of Business Development Kelli Putney.

Kelli Putney

Vice President | Senior Healthcare Advisor

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