A Look at COVID-19's Impact on Hospital Finances

The onset of the COVID-19 pandemic was associated with an average 5.3 percentage point decline in operating margins at US hospitals in 2020, which equated to a 130% drop from 2019 levels. Researchers published their findings in the Journal of Healthcare Management.

“The operating margin declines we observed can be attributed to supply-chain issues, persistent labor shortages, and suspension of elective service,” wrote corresponding author Jordan H. Rhodes, PhD, RTI International, Waltham, Massachusetts, and coauthors from the University of Pennsylvania in Philadelphia and Northeastern University in Boston, Massachusetts.

The study included a balanced panel of 4059 hospitals in the United States. Researchers used data from the Centers for Medicare & Medicaid Services Healthcare Cost Report Information System to investigate changes in hospital financial outcomes from 2019 to 2020.

Between 2019 and 2020, net patient revenues decreased an average 3.2%, and operating expenses increased 1.5%, according to the study. Despite job losses associated with the pandemic, uncompensated care costs did not change.

“The Affordable Care Act reforms in health insurance markets likely helped to insulate hospitals from increases in uncompensated care costs,” researchers wrote.

Financially speaking, investor-owned hospitals were affected less by the pandemic than nonprofit and public hospitals. Researchers found that safety-net and rural hospitals generally fared similarly to their non-safety-net and nonrural counterparts. However, operating margins declined more among hospitals in Medicaid expansion states compared with nonexpansion states due to larger relative declines in patient revenue.

“Our findings stress the need for targeted responses that are tailored to underlying hospital characteristics,” the authors advised. “Temporary and targeted increases in inpatient and outpatient service prices can help offset revenue losses from the deferment of nonurgent care. Other policies can address the ongoing workforce challenges and supply-chain issues.”

Reference:
Rhodes JH, Santos T, Young G. The early impact of the COVID-19 pandemic on hospital finances. J Healthc Manag. 2023;68(1):38-55. doi:10.1097/JHM-D-22-00037