Persistent financial pressure on hospitals & health systems could threaten patient access to care
New analysis shows continued negative impact of COVID-19 on hospital & health system financial health in 2021
WASHINGTON, DC (February 24, 2021) — A new analysis prepared by Kaufman, Hall & Associates, LLC and released by the American Hospital Association (AHA) today shows that the COVID-19 pandemic will continue to impact the financial health of hospitals and health systems through 2021, jeopardizing their ability to care for their communities during the pandemic. The analysis was released in conjunction with a media call the AHA hosted today during which three hospital leaders shared their stories about the real-world challenges they have faced during the pandemic.
Today’s analysis forecasts that total hospital revenue in 2021 could be down between $53 billion and $122 billion from pre-pandemic levels. This sustained financial squeeze on the hospital field could result in the slowdown of vaccine distribution and administration, continued pressure on tired front-line caregivers and diminished access to care, including in rural areas.
“When we talk about the historic financial challenges hospitals face, it’s about more than dollars and cents, it’s really about making sure hospitals and health systems have the resources needed to provide essential services for their patients and communities,” said Rick Pollack, AHA president and CEO. “During the pandemic, people have put off needed care, in some cases to the detriment of their health. In addition, the costs of labor and supplies have increased, adding to financial stress. Vaccines give us hope that the end is in sight, but hospitals need additional support to continue to provide access to care and to help get as many vaccine shots into arms quickly.”
Specifically, today’s analysis found that:
- Under an optimistic scenario, hospitals and health systems could face a $53 billion total revenue loss in 2021. This optimistic scenario assumes that hospitals experience a consistent, complete recovery of patient volumes, vaccine distribution and administration go smoothly, and the country sustains a continued ramp-down of COVID-cases.
- Under a pessimistic scenario, hospitals could face a $122 billion total revenue loss in 2021. This pessimistic scenario assumes that hospitals and health systems see a slow, partial recovery of patient volumes, vaccine rollouts are delayed with continued logistical challenges and the country experiences continued cyclical COVID-19 surges.
- In addition to continued future losses, hospitals and health systems also experienced increases in many expenses due to COVID-19 in 2020 compared with 2019, including:
- Drug expenses per adjusted discharge up 17% as patients being admitted to hospitals and health systems increased in severity and required more therapeutics, including COVID-19 patients.
- Purchased service expenses per adjusted discharge up 16% as a number of areas in hospitals required specialized functions to be brought in, such as environmental services and sterilization for maintaining safe spaces with COVID-19 patients.
- Labor expenses per adjusted discharge up 14% due to contract labor, hazard pay and other expenses for maintaining a workforce.
- Supply expenses per adjusted discharge up 13% as hospitals scaled up their purchasing of PPE and other equipment to safely treat their patients. Shortages throughout 2020 of various supplies led to increased pricing for many of these items.
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 patient volume led to sharply lower revenues. An AHA report from last summer estimated total losses for the nation’s hospitals and health systems to be at least $323.1 billion through 2020. In addition, at least four dozen hospitals entered bankruptcy or closed in 2020, according to data compiled by Bloomberg.
A full copy of today’s analysis can be found on the AHA website HERE.