Hospitals projected to lose $54 billion in net income this year

By Susan Morse for Healthcare News

Higher expenses for labor, drugs and supplies as well as a continuation of delayed care during the ongoing COVID-19 pandemic is projected to cost hospitals an estimated $54 billion in net income over the course of this year, according to a new Kaufman Hall analysis released by the American Hospital Association.

Hospitals and health systems are seeing sicker patients, the report said. This includes COVID-19 patients and patients who put off care during the pandemic. They are requiring longer lengths of stay and more services than prior to the pandemic in 2019, the report said.

The seven-day average of new hospital admissions of patients with COVID-19 has increased 488%, from 1,900 on June 19 to 11,168 on September 14, the report said, citing recent data from the Centers for Disease Control and Prevention.

Many hospitals are also reportedly spending a lot more on staffing, paying for contract or travel nurses due to shortages.

WHY THIS MATTERS

The report projects hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even after taking into account federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year.

If there were no relief funds from the federal government, losses in net income would be as high as $92 billion.

However, the AHA said, the uncertain trajectory of the Delta and Mu variants in the U.S. this fall could result in even greater financial uncertainty for hospitals.

Despite the recent announcement of additional provider relief funds, none have yet to be allocated or distributed, the AHA said.

THE LARGER TREND

This latest analysis incorporates actual hospital performance data in the first and second quarters of this year, from before the latest surge. Projections were then made for the remainder of 2021 based on this data.

Based on the analysis, median hospital margins are projected to be 11% below pre-pandemic levels by year’s end. More than a third of hospitals are expected to end 2021 with negative margins.

Many hospitals were financially challenged and already operating in the red heading into the COVID-19 pandemic, the AHA said last year.

CARES Act funding helped hospitals and health systems, but covered only a portion of the more than $323 billion in losses hospitals were expected to have in 2020.

The government allocated a total of $175 billion in relief funds to providers.

ON THE RECORD 

“America’s hospitals and health systems continue to face significant, ongoing instability and strain as the COVID-19 pandemic endures and spreads,” said AHA President and CEO Rick Pollack. “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. At the same time, hospitals are experiencing profound headwinds that will continue throughout the rest of 2021.”