Pandemic expected to push hospital losses throughout 2021

The financial outlook for hospitals is likely to remain bleak throughout 2021 as the COVID-19 pandemic continues to impact bottom lines across the country.

According to a report prepared by Kaufman Hall and funded by the American Hospital Association, $54 billion in net incomes are projected to be lost by hospitals nationwide over the course of 2021 even with federal CARES Act funding being taken into account.

Specifically, the analysis projects that median hospital margins could be 11 percent below pre-pandemic levels by the end of the year, but warns that the recent increase in COVID-19 cases tied to the Delta variant was not a factor considered in the study.

The analysis, which is based on actual performance data from the first and second quarters of this year, found that more than one-third, 35 percent, of hospitals in the U.S. will maintain negative operating margins through the end of 2021. The authors also notes that the uncertain course of emerging COVID-19 variants in the U.S. this fall could lead to even more losses.

The actual performance results show that the percentage of hospitals with negative operating margins had decreased from the first to second quarters, the analysis see it improving to 35 percent in the third quarter and then stay flat in the fourth. It’s worth noting that the surge in cases tied to the Delta variant was also not included in this analysis, according to the report.

Contributing factors to the continued losses are:

• More high acuity, inpatient cases which require longer stays than before the pandemic.
• Increasing costs for labor, drugs, purchased services, personal protective equipment, and other supplies have led to higher expenses for hospitals.
• Profitable outpatient visits have continued to grow from the depths of the early pandemic but are still below 2019 levels.