LANSING MI- The Michigan Health & Hospital Association (MHA) is drawing attention to a new national report from PricewaterhouseCoopers (PwC) that outlines the severe financial challenges facing hospitals across the country that could soon jeopardize patient care if urgent policy action is not taken.

The report, Inflator: Hospital Costs, from Wages to Hospital Gowns, highlights the mounting pressures on hospitals due to surging costs, workforce shortages and skyrocketing demand for behavioral health services, all while proposed tax cuts and Medicaid funding reductions threaten to widen the gap between costs and revenue.

“This report confirms what hospitals in Michigan and across the country are living every day: skyrocketing costs, growing demand and shrinking margins,” said MHA CEO Brian Peters. “We cannot afford policies that slash Medicaid funding or shift more financial burden to hospitals and patients. Without sustainable support, hospitals – especially those in rural and underserved areas – face real threats of closure.”

Key findings from the PwC report include:

• Hospital margins have plummeted, dropping from an average of 7% in 2019 to just 2.1% in 2024, with additional declines reported in early 2025.
• Drug spending surged by $50 billion (11.4%) in 2024, more than double the increase seen in 2023, largely driven by high-cost therapeutics in chronic disease areas like oncology, obesity and diabetes.
• Behavioral health claims soared, with inpatient claims increasing by 80% and outpatient claims by 40% over a two-year span, reflecting the intensifying behavioral health crisis.
• Tariffs and supply chain challenges continue to drive up the cost of everyday medical supplies, compounding inflationary pressures.
• Medicaid cuts and federal tax policies could force the closure of service lines at facilities that rely heavily on government payers, impacting access to care for all residents.

The report also outlines how hospitals are working to offset financial pressures by investing in revenue cycle improvements and value-based payment models. Still, the report emphasizes that system-wide stability will require collaboration between payers, providers, policymakers and employers, especially as rural hospitals face ongoing threats of closure.

The MHA is supporting Michigan hospitals facing these mounting challenges through the following actions:

• Advocating to preserve and strengthen the federal 340B program, which enables hospitals to purchase outpatient medications at discounted rates, freeing up resources to serve low-income and uninsured patients.
• Working with state policymakers to expand access to mental health and substance use treatment, reduce emergency department (ED) strain and support hospitals’ efforts to meet growing behavioral health needs. This includes Senate Bill 806, which expands the three-hour assessment responsibility by allowing clinically-qualified staff to conduct pre-admission screenings for behavioral health patients seeking care in the ED.
• Leading efforts to expand the healthcare workforce pipeline through partnerships with post-secondary educators, awareness campaigns and recruitment and retention initiatives to help hospitals manage staffing costs while maintaining high-quality care.
• Working to add Michigan to the Nurse Licensure Compact, allowing nurses to practice across state lines without the burden of obtaining additional licenses.
• Advocating against Medicaid cuts and pushing for reimbursement rates that reflect the true cost of care, especially for safety net and rural hospitals that disproportionately rely on public payers.

The full report is available on the PwC website.

About the MHA
Based in Greater Lansing, the MHA is the statewide leader representing all community hospitals in Michigan. Established in 1919, the MHA represents the interests of its member hospitals and health systems in both the legislative and regulatory arenas on key issues and supports their efforts to provide quality, cost-effective and accessible care. The MHA’s mission is to advance the health of individuals and communities.