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A recent survey of health system financial leaders by the Healthcare Financial Management Association examined the pain points executives are facing in a tough market that is characterized by higher operating costs and lower payer reimbursement. At the top of the list, 96% of the 135 system leaders polled say higher labor costs are putting downward pressure on margins, 84% say the same about lower payer reimbursement, and 47% say as much about higher supply costs. Nurses, lab techs, radiology techs, and coders represent the greatest staffing needs. Meanwhile, 19% of health systems have stopped accepting Medicare Advantage (MA) plans, and 61% are considering severing ties with the growing—but cumbersome—payer model. Respondents cite denials and payment delays as the factors contributing to the decision to stop taking MA plans, even though MA plans now cover more beneficiaries than traditional Medicare. Across all payer types, 82% of health systems say they are experiencing more denials now than they did during pre-pandemic times.

Burning at both ends: Operating costs are high across all of healthcare, but when compounded by reimbursement challenges, providers face an especially tough strategic landscape. Arguably, many providers are still recovering from low volumes of profitable services during the pandemic.

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Health Systems Face Low Reimbursement, Higher Operating Costs