Increased Medicare and Medicaid underfunding
According to the 2007 American Hospital Association (AHA) Underpayment by Medicare and Medicaid Fact Sheet, Medicare and Medicaid account for 55% of all care provided by hospitals and both Medicare and Medicaid payments have been falling relative to costs. For example:

• Combined underpayments in 2006 equaled nearly $30 billion, or 5.7% of revenue
• In 2006, hospitals received payment of only 91 cents for every dollar spent caring for Medicare patients and only 86 cents for Medicaid patients
• In 2006, 64% of hospitals received Medicare payments less than cost, while 76% of hospitals received Medicaid payments less than cost

Increased operational costs
According to the AHA, hospitals, clinics and other medical practices nationwide are experiencing dramatic increases in operational expenses, such as pharmaceuticals, supplies, malpractice insurance, etc.

Staffing shortages
Findings from the 2007 AHA survey of Hospital Leaders showed that medical professionals are facing workforce shortages, such as an 11.4% shortage in therapists and an 8.1%, or 118,000, shortage in both nurses and pharmacists. These shortages are resulting in such service impacts as 49% decreased staff satisfaction, 36% ED overcrowding, 17% reduced number of staffed beds and 17% delayed discharge/increased length of stay.

Decreased customer satisfaction
Another impact of the staffing shortages is a sharp decrease in patient satisfaction. The 2007 AHA survey showed that due to staffing shortages, medical practices, hospitals and clinics are seeing a 38% decrease in patient satisfaction. Additionally, a recent McKinsey study reported that, faced with healthcare decisions, consumers are concerned, confused, and unprepared, which also negatively impacts satisfaction.