Oct. 13—HARRISBURG — Pennsylvania hospitals account for a large share of the commonwealth's economic output and are leaders in employment and wages paid but a trade association warns that inflation, workforce shortages and COVID-19 may compromise the sustainability of some facilities and health systems.

"No one has ever seen this much of a challenge," said Andy Carter, president and CEO, Hospital and Healthsystem Association of Pennsylvania (HAP). "Most hospitals are in solid shape but if we don't address the underlying fundamentals they're not going to be in great shape for very much longer."

HAP found that in 2021, Pennsylvania's hospitals contributed $168 billion — directly and indirectly — to the commonwealth's gross domestic product, roughly 20% overall. Hospitals and health systems account for more than a combined 590,000 jobs, direct and indirect, and are top-10 employers in 59 of 67 counties, according to a HAP analysis.

However, HAP found that hospitals combined for $866 million in lost revenue for uncompensated care, up more than 4%. Nearly $7.2 billion in revenue was lost due to COVID-19 including through suspended elective surgeries and increasing equipment and supply costs.

Despite being a leader in jobs, Pennsylvania hospitals employ about 10,000 fewer workers compared to 2019 with vacancy rates of 45% for nursing support staff, 32% for clinical nurse specialists, and 27% for registered nurses. Meanwhile, hourly wages and the use of contracted personnel ballooned as a measure to counter the staffing shortage crisis.

The workforce shortage and a building crisis exacerbated by COVID-19 became a boon for traveling nurses commanding wages far greater than permanent full-time staff.

Kendra Aucker, president and CEO, Evangelical Community Hospital, Lewisburg, said that in 2016, the Union County hospital spent $290,000 on contracted labor. In 2021, the cost was $24.8 million, she said, largely for registered nurses.

Evangelical has long been credited for maintaining independence and healthy finances. The organization was well-managed before Aucker's arrival, she said, and maintains strength in its fiscal reserves. That strength no doubt has weakened, she said, and the patient base that shrank amid the pandemic health scare hasn't returned to pre-pandemic levels.

"The public takes for granted that hospitals are here. From a community hospital perspective, these are unprecedented times," Aucker said. "I can manage my expenses. I have not been able to deal with labor."

According to the American Hospital Association, inflation caused per-patient costs to soar nationwide in 2021 compared to 2019: up 37% for medicine; labor, 19%; supplies, 21%.

Investment gains when the market surged combined with record government pandemic relief funds distorted profit margins in 2021, Carter said, adding that about 30% of HAP's 235-plus member hospitals and health systems lost money last year. Another 15% of the members finished with operating margins below 4%.

"I think it's fair to say there is a very significant threat to the long-term sustainability of hospitals in Western Pennsylvania," Carter said, noting the risk to small and rural hospitals.

Carter said government must improve repayments for Medicare and Medicaid patients. Such patients account for about half of all inpatient days in hospitals nationwide, a figure that jumps to about 67% in 3 in 4 hospitals, per the American Hospital Association.

HAP says that Pennsylvania hospitals are losing 16 cents on the dollar caring for patients covered by Medicare and 12 cents on the dollar for Medicaid.

Rene Suntay, CFO, Meadville Medical Center, Crawford County, estimated the entity's cost for contracted workers at upwards of $13 million, far above the former average of about $400,000.

Like at Evangelical and elsewhere, Suntay said Meadville Medical Center raised its own wages including base entry pay. It hasn't solved the issue. The workforce is thinning, he said. Should the trend continue, he said it could lead to "drastic" measures.

"If we can't get this resolved, it's going to impact the local economy. My employees won't be going around spending a whole lot," Suntay said. "If it gets too cost-prohibitive we may be forced to look at cutting back services. We haven't done that yet but that's the only option we have."

William Caldwell, CEO of Conemaugh Memorial Medical Center, Johnstown, and market president of Conemaugh Health System, said demographics are changing. His system's community is aging and shrinking, he said, and it's evident in the workforce.

The health system is exploring how to incorporate remote work into certain aspects of patient care that don't require a hands-on approach — a difficult task, Caldwell admitted, but a necessary one as it's become a potential solution to labor shortages. The hospital has been particularly successful in recruiting international nurses. About 20 have been recruited, Caldwell said, largely from the Philippines and Ghana.

Caldwell emphasized that the hospital and its outpatient physician group are the 1st and 5th largest employers in Cambria County, respectively.

"If you were to take away 2,000 jobs in Cambria County, and that's an understated figure for Conemaugh Memorial, that's an economic hit that's huge," Caldwell said. "We're going to have to get really creative in how we manage things and deliver care differently."