Swiss hospitals are slipping from a weak to an emergency situation

This year's study "Swiss hospitals: This is how healthy their finances were in 2023" by PwC Switzerland speaks plainly: the financial situation of Swiss hospitals is alarming. Some cantons have already taken out rescue packages, and others are likely to follow. This raises the question of which facilities are still necessary and sustainable and which are not. The planned packages are likely to cost Swiss taxpayers over CHF 1 billion a year in view of the gaps and the support already provided, the study calculates. The study was conducted in July 2024 on the basis of the published annual accounts of 44 acute hospitals and 12 psychiatric clinics. In order to reflect the reality in practice, the study contains excursuses on various key topics and three interviews on best practice with renowned industry personalities.

Existential threat to acute care

According to PwC, the financial year 2023 shows worrying health figures for acute hospitals: eroding margins, falling liquidity, declining equity ratios. As tariff adjustments did not keep pace with inflation, the median EBITDAR margin shrank to a worrying 3.6 %, which is significantly below the industry target of 10 % defined by PwC and also marks the lowest level since the introduction of the SwissDRG tariff system in 2012.

In 2023, even more hospitals will be making losses than in the previous year. In view of the current financial results, hardly any of the study hospitals could survive on their own financial strength in the long term. This presents the cantons, as planners of healthcare provision, with difficult decisions with far-reaching consequences for the Swiss healthcare system. Patrick Schwendener, Head of Healthcare Deals at PwC Switzerland, comments: "Although many hospitals and their owners are aiming for an EBITDAR margin of 8 % to 10 %, they are not operating profit-oriented. This attitude sends out the wrong signals and ultimately jeopardizes the existence of the facilities." 

Psychiatric clinics continue to grow

Psychiatric clinics increased their total revenue by a median of 4.8 % in 2023 to a new record high. Growth was driven by a substantial increase in inpatient and outpatient revenue. The latter increased by a median of 11.6 % compared to the previous year. The EBITDAR margin climbed to a median of 8.1 %. Accordingly, psychiatric clinics are also sufficiently liquid to meet their short-term payment obligations. High capacity utilization, the necessary investment volumes and the worsening shortage of specialists remain key challenges in this segment. 

First aid yes, but

Since the beginning of 2022, the structural adjustment of the Swiss hospital landscape has accelerated due to financial challenges and a lack of specialists. System-related consolidation makes sense, but an uncoordinated approach can distort competition and prevent sensible structural adjustments. The cantons' planned first aid measures are likely to cost Swiss taxpayers a cumulative total of over CHF 1 billion per year. Philip Sommer, Head of Healthcare Consulting at PwC Switzerland, comments on this fact as follows: "Rescue packages are not a sustainable solution. In the long term, reforms are necessary to ensure the efficiency and stability of healthcare provision."

Systemic relevance as a key criterion

As a key argument for a targeted rescue of hospitals, PwC recommends focusing on the systemic relevance of individual facilities. A facility is systemically relevant if its closure would have a fundamental impact on the healthcare region. Whether for equity or debt subsidies, guarantees, compensation for public services, takeovers or rescue companies: In the decision-making process for restructuring, the cantons must define a suitable set of instruments for each individual hospital in an objective and owner-neutral manner and communicate them openly. Stefanie Schneuwly, Senior Manager Consulting Healthcare at PwC Switzerland, explains: "Hospitals that receive financial support from the cantons must be measured against clear criteria and requirements. This should be made transparent."

Politically preventing collapse

The current crisis is structural in nature and has grown over the years. Cost pressure, labour shortages, poorly financed outpatient care, a lack of necessary investment in digital transformation or infrastructural modernization and a lack of networking of hospital structures are putting financial pressure on hospitals. In order to prevent the collapse of the high-quality Swiss healthcare system and provide incentives for integrated, networked care, PwC believes that political adjustments to the framework conditions are necessary. The regulatory authorities should create better framework conditions, for example by using the uniform financing of outpatient and inpatient services directly for the right incentives in the tariff systems, adjusting the tariff systems more quickly to the cost reality via inflation adjustments, reducing the regulatory requirements in order to promote innovative care models and focusing on quality in the long term.

Source: PwC