Finger-pointing makes headlines, but it won’t fix Michigan’s health care challenges. Rising costs are real for families and employers — and for hospitals, too. What’s not real is the claim that hospitals are driving those costs with unnecessary or ineffective care. That narrative misunderstands the complexities pushing spending higher, and risks harming patients by undermining the very providers keeping emergency rooms, trauma centers and maternity units open.
Let’s start with what hospitals can’t control.
Drug spending surged in 2024, driven by several high-cost medicines in oncology, diabetes and autoimmune disease, the PwC Health Research Institute found. At the same time, labor — the people who staff intensive care units, operating rooms and emergency departments around the clock — is the single largest expense for hospitals, accounting for more than half of total costs as wages rose to retain nurses and other critical staff during an unprecedented workforce shortage, according to the American Hospital Association.
On top of that, inflation, supply chain disruptions and tariffs continue to push up the price of routine medical supplies, from surgical gowns to IV tubing.
Reimbursements don’t cover the cost of care
Hospitals also treat everyone seeking emergency care. In line with our mission and federal law, we care for everyone who comes through our doors, 24/7, regardless of their ability to pay. When a patient arrives with a stroke at 3 a.m. or a child needs trauma care after a car crash, no hospital in Michigan asks for a credit card before providing care. That’s a promise we will always keep.
Meanwhile, public reimbursements routinely fail to cover the cost of that care. In the most recent national data, Medicare paid just about 83 cents for every dollar it costs hospitals to care for a Medicare patient, contributing to more than $130 billion in annual underpayments when Medicare and Medicaid are combined, per the American Hospital Association. Hospitals also deliver tens of billions of dollars in essential but uncompensated care each year to patients with no ability to pay, the association found.
Michigan’s picture mirrors these national pressures. Hospitals across our state continue to absorb more than $1 billion in uncompensated and under-reimbursed care collectively. Rural and northern communities feel these pressures most acutely, where keeping obstetrics or inpatient psychiatric services open can hinge on razor-thin margins, the Michigan Health & Hospital Association, the group I lead, found.
Follow the money
Margins tell the real story.
Michigan was one of only four states in the country where hospitals had, on average, a negative margin, according to the Kaiser Family Foundation. In rural America, closures and conversions have accelerated since 2010, and nearly half of rural hospitals nationally are now in the red, and hundreds vulnerable to closure.
In Michigan, more than half of rural hospitals are operating at negative margins, the Chartis Center for Rural Health reported. These are not signs of a system profiteering off patients. These are signals of a system under financial stress.
And when hospitals are financially destabilized, patients pay the price, not through higher prices but through lost access. When a mother in the U.P. must drive over an hour to deliver a baby, that’s not a finance story. It’s a public safety crisis.
If you want to know who is profiteering off health care, follow the money.
Independent analyses show drug manufacturers’ margins far exceed those of hospitals, with drug company profitability running two to three times higher than hospital margins in many comparisons, according to the Journal of the American Medical Association (JAMA). A 2024 review of sector margins likewise found that PhRMA’s average net income margins dwarf those of other drug-supply-chain players, the Campaign for Sustainable Rx Pricing found.
Hospitals are the backbone of care
Hospitals are doing our part.
Across Michigan, hospitals are moving care to more affordable settings, using lower-cost medication alternatives when appropriate, improving care coordination and expanding the behavioral health workforce.
But no health system can sustain 24/7 readiness — trauma, neonatal intensive care, emergency psychiatry — if reimbursement chronically fails to meet the actual cost of care and costs for labor, supplies and drugs continue to rise.Let’s be honest with patients and employers: Hospitals are not the villains of affordability.
We’re the backbone of access: the nurse at the bedside at 3 a.m., the surgical team on call, the therapist helping a child walk again. Michigan hospital teams will keep showing up with compassion and professionalism.
What we ask in return is an honest conversation grounded in facts, not talking points, because protecting access to care in every Michigan community is a responsibility we all share.
Brian Peters is CEO of the Michigan Health & Hospital Association. Submit a letter to the editor at freep.com/letters, and we may publish it online and in print.
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This article originally appeared on Detroit Free Press: Hospital association head: ‘Finger-pointing’ won’t fix rising health care costs | Opinion
Reporting by Brian Peters / Detroit Free Press
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