Hospitals, Health Systems Will Lose $54 Billion in Net Income in 2021

As a result of the COVID-19 pandemic, hospitals and health systems are treating sicker patients, as well as paying more for labor, drugs and supplies, according to a new report prepared by Kaufman, Hall & Associates, LLC for the American Hospital Association (AHA).

The patients being treated by hospitals and health systems are sicker due to COVID-19 or from delaying care as a result of the pandemic. These patients require longer lengths of stay and more services. From June 19 to September 14, the seven-day average of new hospital admissions of patients with COVID-19 increased 488%.

“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 statement. “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.”

The report projects that hospitals will lose an estimated $54 billion in net income throughout 2021, even after taking into account 2020’s federal Coronavirus Aid, Relief, and Economic Security (CARES) Act.

In addition, more than one-third of hospitals will maintain negative operating margins through year’s end. Median hospital margins are projected to be 11% below pre-pandemic levels by the end of 2021. While 35% of hospitals are expected to have negative operating margins by the end of the fourth quarter, it’s an improvement from the first quarter, when 47% of hospitals had negative operating margins.

“Even as overall hospital revenues are improving, they are offset by mounting expenses in caring for greater numbers of sicker, high‑acuity patients who require longer hospital stays, more supplies and staff time, and more resources overall,” according to the report.

In addition to dealing with sicker patients and higher expenses, hospitals have fewer outpatient visits, which tend to have lower expenses and higher margins. While outpatient visits grew, they remained below 2019 levels and have not fully recovered after shutdowns and other efforts to slow the spread of COVID-19 during the early months of the pandemic.

“While many hospital leaders hoped 2021 would provide an opportunity to return their organizations to greater financial stability after the severe losses seen in 2020, those hopes are dimming as the virus continues to circulate throughout the population,” the report concludes.