AHA warns ‘perfect storm’ threatens hospitals with rising costs, reimbursement cuts
The American Hospital Association (AHA) released a new report analyzing the effects of the current economic landscape in healthcare, from the evolving impacts of President Donald Trump’s tariffs, to proposed cuts to Medicaid and Medicare.
The lobbying group representing hospitals and health systems warns that threats posed by higher costs and reduced reimbursement may create a “perfect storm of financial pressures” that could make it difficult for organizations nationwide to provide care, limiting access for patients.
Economic strains on facilities include the rising cost of labor, fueled in part by the skyrocketing cost of living workers face. In 2024, the AHA said staffing accounted for 56% of operating costs for most hospitals. When combined with reduced payments from insurers, the “financial headwinds” could cause revenues to suffer and create turmoil, the group argued.
According to the report, healthcare entities “absorbed $130 billion in underpayments from Medicare and Medicaid in 2023 alone.” They added that these “shortfalls are worsening—growing on average 14% annually between 2019 and 2023.”
“Medicare reimbursed just 83 cents for every dollar hospitals spent caring for patients in 2023. From 2022 to 2024, general inflation rose by 14.1%, while Medicare inpatient payment rates increased by only 5.1%—amounting to an effective payment cut over the past three years,” the AHA added in a statement detailing the report’s findings.
Trump’s tariffs—a new economic challenge to contend with in 2025 and beyond—could significantly raise costs for hospitals to the tune of 15%, fueled by more expensive medical equipment and devices. Citing a recent survey, the AHA said “82% of health care experts expect tariff-related expenses to raise hospital expenses” over the next six months, with 94% of surveyed administrators planning to delay equipment upgrades to “manage the financial strain.”
“At the same time, Congress is considering proposals that would cut Medicaid, Medicare and other programs that support the 24/7 care and services that hospitals provide to patients in every community across America,” the AHA lamented.
The report also took aim at Medicare Advantage plans, specifically an increase in “delays, denials and underpayments” that place significant financial uncertainty on hospitals. According to the AHA, reimbursement from MA plans fell 8.8% between 2019 and 2024, with no changes to the downward trend.
Call to action for policymakers
As for a solution, the AHA pointed to policymakers, asking them to address the concerns outlined in its analysis.
“This report should serve as an alarm bell that a perfect storm of rising costs, inadequate reimbursement, and certain corporate insurer practices are jeopardizing the ability of hospitals to deliver high-quality, timely care to their communities,” AHA President and CEO Rick Pollack said of his group’s findings.
“With so much at stake, policymakers must recommit to making preserving access to hospital care a national priority,” he added.
The full report from the AHA is available here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.