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Hospitals cite drug and supply shortages, rising patient acuity and negative margins
Summary
MHA witnesses described supply‑chain shocks, high drug price spikes and rising patient acuity that increase hospital costs and contribute to negative margins in Michigan.
Michigan hospital representatives told the House Insurance Committee that supply and drug shortages, rising patient acuity and long‑term payment shortfalls from Medicare and Medicaid are increasing costs and squeezing hospital margins.
Laura Pell, executive vice president for government relations and public policy at the Michigan Health & Hospital Association, described historic shortages of chemotherapy drugs and intravenous fluids as examples. She told the committee that one health system's pharmacist could not find carboplatin during a shortage; the system paid about $550 per dose for a three‑week emergency supply that normally cost about $11 per dose.
Pell said manufacturing consolidation and facility shutdowns after hurricanes have created vulnerabilities in the U.S. supply chain for items such as IV solutions. "We had an IV fluid solution shortage after hurricane Helene. That closed down a production facility ... it still wasn't enough," she said.
MHA also cited a RAND Corporation analysis (2022 data, published in 2024) showing Michigan ranks near the bottom nationally when inpatient and outpatient commercial paid rates are expressed as a multiple of Medicare; the association said the state's blended commercial multiple was below 200% and Michigan ranked 40th in that measure.
Cutter and Pell also raised administrative and payer‑imposed costs such as prior authorization and appeals, which they described as a significant operational burden. "There are many payer imposed compliance requirements that they're simply expensive to manage," Cutter said.
Why it matters: The association argued that reduced acquisition costs for certain outpatient drugs via federal programs and improved supply resiliency can help offset shortfalls from government payers and blunt pressure on hospital operations, but they warned that margins in Michigan were negative last year.
Ending: Committee members asked the association for documentation on medically underserved designations and other follow‑up data; the association agreed to provide maps and its community impact report.
