COVID-19 Surge Threatens Hospital Finances

Hospital operating margins are poised to fall as COVID-19 cases increase, new data show.

Although the federal relief funding buoyed hospitals, the median hospital operating margin still dropped 1.2 percentage points (8.5%) year over year, and 1.7 percentage points (18.7%) for January through October compared to the same prior-year period, according to Kaufman Hall’s analysis of around 900 hospitals.

Without the relief funding, the median operating margin dropped 6 percentage points (69.4%) comparing the first 10 months of 2020 to the first 10 months of 2019. But on a month-to-month basis, Kaufman Hall’s median hospital operating margin index slightly improved, without factoring in relief funding.

Emergency department visits remained the hardest hit, falling 16% over that span. Meanwhile, expenses per adjusted discharge increased 13.5% over that 10-month period as labor, personal protective equipment and drug costs rose.

“The next few months will be a grave period for our country, and for our nation’s hospitals and health systems,” Jim Blake, a managing director at Kaufman Hall, said in prepared remarks. “If unchecked, the virus is projected to continue its rapid spread through communities as families gather for the holidays, and as colder weather pushes more activities indoors. The potential public health implications and financial impacts for our hospitals could be dire.”

As of Oct. 31, the number of daily U.S. COVID cases reached a high of more than 90,500 and related hospitalizations surpassed 47,400, according to the COVID Tracking Project.

The combined forces of the pandemic and seasonal flu will likely drive stricter preventive measures and capacity limits, causing many to delay non-urgent procedures and outpatient care. Hospitals’ losses could mirror those experienced in March and April, Kaufman Hall researchers warned.

Operating room minutes declined 12% for January through October compared to that 10-month span in 2019. Still, most volumes along with overall operating margins improved in October on a month-to-month basis.

Lawmakers have yet to reach a compromise on another comprehensive COVID-19 relief package as important benefits are set to expire in December.

The overall economy showed some gains in October, with increases to Gross Domestic Product, a decline in the unemployment rate and continued easing of monetary policy. But Congress’ failure to pass another stimulus package is causing many observers to question the economic recovery, according to the report.



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