Sicker patients, fewer outpatient visits, and higher expenses for labor, drugs, and supplies will continue to damage the financial health of hospitals and health systems throughout 2021, says a new analysis released today by the American Hospital Association (AHA).
Hospitals nationwide will lose about $54 billion in net income over the course of the year, even after considering federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year, projects the report, prepared by Kaufman, Hall & Associates, LLC.
Because these projections were made based on hospital performance data in the first and second quarters of this year, before the latest surge, hospitals may face even greater financial challenges because of the uncertain trajectory of the Delta and Mu variants in the United States this fall.
Contributing factors include:
Sicker patients. Hospitals are seeing more high acuity, inpatient cases—COVID-19 patients and those who put off care during the pandemic—requiring longer lengths of stay than prior to the pandemic. While such cases are contributing to revenue increases, any gains are offset by higher care costs for treating patients with more severe conditions.
Higher expenses. Expenses are rising across the board, as hospitals face increasing costs for labor, including spending a lot more resources on contract or travel nurses due to staffing shortages, drugs, purchased services, personal protective equipment (PPE), and other medical and safety supplies needed to care for higher-acuity patients.
Fewer outpatient visits. Hospital outpatient visits—which generally have lower expenses and higher margins—continue to grow, but remain down, compared to 2019 levels. They have yet to fully recover after plummeting with nationwide shutdowns and COVID-19 mitigation efforts in the early months of the pandemic.
In recent months, the spread of the highly contagious Delta variant has set back hospitals even more. The seven-day average of new hospital admissions of COVID-19 patients increased 488%, from 1,900 on June 19 to 11,168 on September 14, according to recent data from the U.S. Centers for Disease Control and Prevention.
“America’s hospitals and health systems continue to face significant, ongoing instability and strain as the COVID-19 pandemic endures and spreads,” Rick Pollack, AHA president and CEO, said in a press release.
“With cases and hospitalizations at elevated levels again due to the rapid spread of the Delta variant, physicians, nurses, and other hospital caregivers and personnel are working tirelessly to care for COVID-19 patients and all others who need care,” he said. “At the same time, hospitals are experiencing profound headwinds that will continue throughout the rest of 2021.”
The analysis also found that:
- Higher costs of caring for sicker patients and fewer outpatient visits than pre-pandemic levels could lead median hospital margins to be 11% below pre-pandemic levels by year’s end.
- More than one-third of hospitals are expected to end 2021 with negative margins.
- If there were no relief funds from the federal government, losses in net income would be as high as $92 billion, which further emphasizes the magnitude of losses hospitals will likely continue to face through the end of 2021.