Pennsylvania is Falling Behind Protecting Hospital Care
Health care access has put Pennsylvania into the national spotlight over the past few years – but for all the wrong reasons.
Last fall, a national health care publication explored why the commonwealth holds the dubious distinction of leading in hospital closures. As a maternity care desert the size of Connecticut continues to grow, Pennsylvania continues to rank among the states with the greatest losses of labor and delivery services. Recent hospital closures in the state have made national headlines as neighboring hospitals partner with community leaders to maintain access to emergency care.
These trends are alarming, particularly in a state where hospitals consistently rank among the top third of states for health care quality and support about one in eight jobs and nearly a fifth of the commonwealth’s entire GDP. And as state leaders look to attract economic growth and spark Pennsylvania’s resurgence, falling behind in protecting the care and services that communities depend on isn’t an option.
The Hospital and Healthsystem Association of Pennsylvania (HAP) commissioned national consulting firm Oliver Wyman to analyze Pennsylvania’s hospital landscape compared to other states. We released the findings this month in a new report, Time to Act: What The Future Holds For Pennsylvania’s Hospitals, Patients, and Communities.
Our analysis of the environment in which Pennsylvania hospitals operate gives new insight into root cause of these trends. Keeping hospitals open in Pennsylvania is significantly more challenging than in other states, in large part because hospitals here have been paid less than hospitals in most states for the care they provide. Without action by state policymakers to address below-average reimbursement, these headwinds will only worsen, putting more communities’ access to care and economies at risk.
Fewer than half of Pennsylvania’s hospitals are operating with margins necessary for long-term stability – 37% are operating with a loss – and 25 have closed statewide in the past decade. Our analysis projects that, without intervention, as many as 12–14 more hospitals could close over the next five years, adding 22 minutes to Pennsylvanians’ average drive to the nearest hospital and costing $900 million in lost wages due to job losses. Many more could be forced to reduce critical services, like maternity care and behavioral health. Rural hospitals face unique risks because of the characteristics of the communities they serve.
This is a direct result of Pennsylvania hospitals operating with a structural imbalance. Their cost for providing care is increasing due to inflation, workforce shortages, administrative burdens, and other factors. But the payments they receive for that care – particularly from Medicare and Medicaid, which account for almost half of patients – aren’t keeping up.
Nationally, Medicare pays hospitals about 82 cents per dollar in cost. But Medicaid payments vary based on state policies, and Pennsylvania reimburses hospitals 11 percentage points less than the national median. Factoring in hospitals’ total cost of providing care to Medicaid and uninsured patients, Pennsylvania’s Medicaid program reimburses, on average, 71 cents per dollar.
Compounding this strain are Pennsylvania’s medical liability environment, which causes the highest per capita cost of payouts nationally and creates barriers to attracting providers and maintaining high-risk services, and a 40-year-old regulatory structure that is costly to navigate.
It's important to note two points. First, while federal policies enacted last year though H.R. 1 will make a bad situation much worse, Pennsylvania hospitals were already on an unsustainable trajectory before a single payment cut goes into effect. Even without H.R. 1, our modeling shows Pennsylvania hospitals on track to have further margin deterioration and closures.
Second, these challenges are despite Pennsylvania hospitals’ efforts to control costs and increase efficiencies – such as leading ambitious transformation efforts powered by artificial intelligence – without compromising high-quality, affordable care. Compared to neighboring states, Pennsylvania hospitals’ cost per discharge was 29 percent lower in 2023 and has grown slower over the past 15 years. Despite this, Pennsylvania hospitals and health systems have much lower bond ratings than the national median, affecting investments and growth.
Change starts at home. Pennsylvania policymakers have clear and meaningful opportunities at the state level to reverse these trends and protect communities’ access to care.
The Oliver Wyman team identified imperatives to improve hospital sustainability, including improving hospital reimbursement, reforming medical liability rules, and streamlining administrative requirements, as the greatest opportunities for state policymakers to help stabilize hospitals. And HAP is leading advocacy for policies to do just that, including providing clear steps for Governor Shapiro and the General Assembly to prioritize sustainable hospital payments in 2026–2027 state budget.
Pennsylvania needs strong hospitals – not just for access to health care but also to have vibrant and competitive communities that can attract businesses and families. Strengthening the commonwealth’s economy and ensuring it is the best place to live, work, and grow means being a national leader in supporting the hospitals that communities depend on – not an outlier.
