A new analysis prepared by Kaufman, Hall & Associates, LLC and released by the American Hospital Association (AHA) highlights the ongoing consequences of the COVID-19 pandemic on the financial stability of hospitals and health systems, threatening their ability to continue to provide essential services to their patients and communities.
Today's analysis from Kaufman Hall finds:
- Even under the most optimistic scenario with a smooth vaccine roll-out and reduced COVID-19 hospitalizations, on average, 39% of hospitals would operate in the red in 2021, a marked increase over pre-pandemic baselines, according to Kaufman Hall data. Under this scenario, median hospital operating margins would be 10.5% down from pre-pandemic baselines in 2019. Before COVID-19, the median hospital margin was a modest 3.5%.
- In the most pessimistic scenario, on average, half of hospitals would operate in the red in 2021, with median margins down 80% from pre-pandemic baselines.
- For rural hospitals, the most optimistic scenario would result in median margins that are 38% down from pre-pandemic baselines, with the most pessimistic scenario resulting in a 100% decline from baselines.
Today's analysis builds on another Kaufman Hall report released last month that forecasts that total hospital revenue in 2021 could be down between $53 billion and $122 billion from pre-pandemic baselines.
"As the COVID-19 pandemic enters its second year, America's hospitals and health systems remain on the frontlines caring for patients and fighting this virus," said Rick Pollack, AHA president and CEO. "The support our field has received so far has been greatly appreciated and has kept many hospitals afloat to provide patients with needed care. However, as this report makes clear, hospitals and health systems will need further relief to meet the health care needs of their patients and communities."
For any organization, a positive operating margin is essential for long-term survival. It allows hospitals and health systems to invest in new facilities, treatments and technologies to better care for patients and communities. It also helps ensure they can attract and retain frontline caregivers and other critical staff and purchase personal protective equipment (PPE), drugs and other necessary supplies and equipment. The majority of a hospital's expenses are labor and supply and equipment costs.
For today's analysis, the most optimistic scenario assumes that hospitals experience a consistent, complete recovery of patient volumes, vaccine distribution and administration go smoothly, and the country sustains a continued ramp-down of COVID-cases. The pessimistic scenario assumes that hospitals and health systems see a slow, partial recovery of patient volumes, vaccine rollouts are delayed with continued logistical challenges and the country experiences continued cyclical COVID-19 surges.
In 2020, COVID-19 undermined our nation's health and severely tested our hospitals and health systems. At the same time that a series of spikes in COVID-19 cases and hospitalizations put intense pressure on hospital staff and resources, steep declines in non-COVID-19 patient volume led to sharply lower revenues. An AHA report from last summer estimated total losses for the nation's hospitals and health systems to be at least $323.1 billion through 2020. In addition, at least four dozen hospitals entered bankruptcy or closed in 2020, according to data compiled by Bloomberg. More information on the financial crisis facing the hospital field can be found HERE. Today's report highlights the extent to which many of these same challenges persist in 2021.
A full copy of today's analysis can be found on the AHA website HERE.