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The Nebraska Hospital Association said the average net operating margin for the state's hospitals declined from 6.6% in 2021 to 1.8% last year, a decline of 72%. The group said more than half of hospitals operated at a loss.

The main culprit for the declining financial prospects at the state's hospitals is rapidly rising costs, hospital officials say.

According to the NHA, the overall costs to provide patient care in Nebraska have soared 21.3% in the three years from 2020 through 2022. Hospital workforce costs are up 26.8% during that period, medical supply costs are up 25.4% and drugs are up 42.5%.

Insurance reimbursements, especially payments from Medicare and Medicaid, are not keeping up with the rise in costs, the officials said.

Medicare reimbursement rose 3.2% last year, while Medicaid reimbursement rose only 2%.

"The high costs of care and the low reimbursements have created unsustainable financial conditions for Nebraska hospitals, and for some hospitals created even a financial crisis," said Jeremy Nordquist, president of the NHA.

Summer Owen, chief financial officer of Great Plains Health in North Platte, said that over the past few years she's experienced, "the worst cost inflation I've seen as a health care finance leader."

That led the hospital's net operating margin to drop from 11.3% in 2021 to 5.3% last year, which resulted in a net loss of $18.6 million, Owen said.

This year is starting off even worse, with a negative operating margin in January and a forecast full-year margin of 3.8%.

"This trend is very concerning," Owen said. "The current economic model for hospitals is simply not sustainable."

Nebraska Medicine is in a similar situation, with Bryce Brackle, vice president of finance, saying the Omaha-based health system is projected to see an operating loss this year.

Brackle said it's "critical" that reimbursement rates increase more than they historically have to keep up with inflation or Nebraska Medicine will be forced to make cuts.

Other hospitals have already been making cuts, according to the NHA, which provided a list of cuts made in 2022, including eliminating services such as maternity care, hospice and home health; reducing patient capacity; and closing nursing homes and behavioral health units.

Some smaller hospitals could even be on the verge of closing.

A recent report from the Center for Healthcare Quality and Payment Reform said seven rural hospitals in Nebraska — about 10% of all small hospitals in the state — are at risk of closing in the near future.

Many hospitals had been propped up during the pandemic by $175 billion in federal aid, but that aid has largely ended, leaving hospitals everywhere, not just in Nebraska, in worse financial shape.

According to consulting firm Kaufman Hall, last year was the worst year financially since the pandemic started.

Owen said those federal funds were critical to helping sustain operations during the pandemic, but it's the cost increases that came after and have continued to persist that have put hospitals in such a precarious situation.