What Will the IV Fluid Shortage Mean for Hospital Finance?

The American health system is already in a major financial crisis, as a result of supply chain issues and a staffing crisis exacerbated by the COVID pandemic. This led to many healthcare systems relying on “locums” or temporary staffing, which ultimately caused a major drain on cash flow and reduced operating margins in large and medium-sized healthcare systems.

For years, more and more hospitals have been reducing their medical and surgical services. In many cases, hospitals have closed altogether, creating “medical deserts” and forcing patients to seek medical care outside of their own community — sometimes in other states. Due to burgeoning costs and shifting care needs, 21 hospitals and emergency departments have already closed in 2024, with nearly 200 hospitals in rural America shuttered since 2005, often linked to narrow operating margins.

The most recent crisis to affect hospitals and further impact patient care was triggered by Hurricane Helene, which led to the shutdown of a large Baxter International Inc. production plant in rural Marion, North Carolina that supplies more than 60% of the IV solutions utilized by U.S. hospitals. In fact, a recent survey found that more than 86% of healthcare providers are experiencing shortages of small- and large-volume fluids, including fluids for peritoneal dialysis. The survey noted that approximately half of the respondents reported inventories with fewer than 10 days of IV fluids available.

Not only has this shortage added enormous pressure to financially stressed healthcare systems throughout the U.S., but also, it represents yet another shortage stemming from a lack of strategic distribution of production facilities and supply chains for essential medical resources.

The Health and Financial Impact of the Shortages

This shortage has led major healthcare systems to postpone elective outpatient and inpatient surgeries in order to provide IV fluids to critically ill patients, such as those in the emergency department or the intensive care unit. These delays are expected to continue for several more weeks.

As we previously learned from the pandemic, elective surgeries and admissions are a major source of income for hospitals. Facility fees are crucial for supporting healthy operating margins to meet the bottom line.

Data from the American Hospital Association (AHA) indicate a net operating loss of more than $200 billion over a 4-month period during the lockdown at the height of the pandemic in 2020. (Of note, this stemmed not only from cancelled or delayed care, but also from other pandemic-specific factors.) This was a crushing blow to rural and safety-net hospitals, including those located in urban areas. This occurred on the heels of an already struggling healthcare system, plagued by a lack of sufficient numbers of staff, stemming from burnout and moral injury linked to practices associated with workflow and productivity expectations.

Short- and Long-Term Solutions

Addressing the current shortage of IV fluids is part of a coordinated effort between federal agencies, such as the White House, the FDA, the CDC, and the Administration for Strategic Preparedness and Response (ASPR).

Right now, short-term solutions are a priority. President Biden recently invoked the Defense Production Act (DPA), which will allow Baxter International to obtain materials to clean and rebuild its facilities. Meanwhile, other manufacturers are coming on board to ramp up production of IV fluids. The CDC issued a health advisory to warn providers of potential care disruptions and to encourage health systems to enact plans to conserve and ration resources appropriately. The response will also require the use of fluids from foreign suppliers in the short-term: the FDA gave temporary approval for Baxter to import its products from the U.K., Ireland, China, and Canada.

But getting at the root cause of the shortages is key for implementing long-term solutions. While the hurricane set the shortage into motion, the underlying reason for IV fluids shortages ultimately stems from low profit margins. In fact, three IV fluids have been in chronic shortage for years now. This is the result of excessive time and cost barriers to adhere to regulatory requirements for production of IV fluids, as well as challenges related to storage, transport, and weight of the products.

Longer-term solutions to preventing IV fluid shortages must focus on developing federal regulations that mandate a more balanced regional distribution of production facilities throughout the U.S. All stakeholders must first acknowledge the deficiency in our production and distribution network that currently exists and agree to regionalize and diversify the locations in which production facilities are constructed.

In doing so, climate change is also a major factor that must be considered. By factoring in potential for flooding and wind damage, regional governments, the private sector, and ASPR and the FDA could all come to the table to map out strategies to ensure the safety of production of IV fluids and other essential medical resources. Stakeholders must reconsider geographical distribution of production facilities, and not rely on a single facility to produce the majority of IV fluids — a facility which is located in a rural section of Appalachia that is prone to massive inland flooding with poor infrastructure.

We can and must do better to fix a system that awards tax incentives for corporations to build production facilities in particular regions, without taking into account whether they are prone to natural disasters. While jobs are certainly a principal factor in helping communities thrive, we must also factor in the necessity of creating a safety net for vital resources, such as IV fluids for patient care.

The fragile ecosystem and supply chain in our nation’s healthcare industry remains vulnerable unless we design and implement practical solutions that focus on regionalization and diversification of U.S. production facilities.

Robert Glatter, MD, is an assistant professor of emergency medicine at the Zucker School of Medicine at Hofstra/Northwell, Lenox Hill Hospital, and Northwell Health in New York. Peter Papadakos, MD, is director of critical care medicine and a professor of anesthesiology, surgery, neurology, and neurosurgery at the University of Rochester in New York. He is also a professor of internal medicine at the Mercer University School of Medicine in Macon, Georgia.