How could COVID-19 affect the financial health of hospitals in 2021?
In 2020, COVID-19 undermined our nation’s health and severely tested our hospitals and health systems. At the same time that a series of spikes in COVID-19 cases and hospitalizations put intense pressure on hospital staff and resources, steep declines in non-COVID-19 volume led to sharply lower revenues.
As hospital executives, policymakers, and other stakeholders seek to understand hospitals’ financial state in 2021, a new set of interconnected factors must be considered:
- Recovery of hospital volumes: The degree and pace at which inpatient, outpatient, and emergency department volumes return
- COVID-19 vaccine progress: The availability of vaccines, the speed of distribution, and the prioritization of different populations for vaccination
- Decline in COVID-19 cases: The degree and pace at which COVID-19 cases decline, based on public use of social distancing and achievement of herd immunity
In this report, Kaufman Hall used historical hospital revenues and different possible paths for these three recovery factors to forecast 2021 hospital revenue, a critical criterion in determining the financial health of America’s hospitals. The report presents two scenarios related to the three recovery factors—one more optimistic and one more pessimistic. Both scenarios are realistic, and both show a significant revenue loss compared with what would be expected absent the effect of COVID-19. The report also shows expense factors associated with COVID-19 likely to continue to pressure hospital finances as the pandemic continues.
This report was prepared at the request of the American Hospital Association.