Health Care

Hospitals still struggle with volumes, finances due to COVID-19

Dive Brief:

The distribution of vaccinations may signal an end in sight for the pandemic, but COVID-19 continues to financially impact hospital operations, according to the latest report from Kaufman Hall.

Hospital operating margins remained deeply depressed compared to January 2020, even with CARES Act funding, although pre-tax earnings remained in the black, the consultancy found.

Volumes were also down on a year-over-year basis as many individuals continue to defer care, with metrics like patient discharges, patient days, operating room minutes and emergency department visits in January significantly lower than one year ago.

Dive Insight:
Some hospital operators are beginning to pull out of 2020’s financial funk, driven primary by wholesale cancellations of elective procedures and patients avoiding in-person clinical encounters. HCA, for example, recently beat Wall Street estimates on both revenue and net income by a significant margin, as did Tenet Healthcare, although the latter is less sanguine about its 2021 prospects than the former.
Data from Kaufman Hall suggest that Tenet’s cautiousness might be the best long-term approach. According to its national hospital flash report for January, the median hospital operating margin was down 46.1% compared to January 2020, and down 34.1% when CARES Act funding is factored in. Smaller hospitals tended to experience smaller drops than larger institutions, according to the data.
Overall hospital discharges were down 12.7% compared to January 2020, while adjusted discharges were down 17.6%. Adjusted patient days were down 8.3%, and operating room minutes were down 16.6%. Emergency department visits were down 24.7%, suggesting that one of the biggest feeders into inpatient admissions will remain significantly depressed for the foreseeable future.
Hospitals in the western U.S. and Great Plans region had smaller drops in patient days than facilities elsewhere in the country, Kaufman Hall found.
Gross revenue not factoring in CARES Act funding was down 4.8% compared to January 2020, although down just 3.2% compared to December 2020. Bad debt was up 20.4% compared to January of last year.
Total expenses were up 4.5% compared to January 2020, although they were down 2.3% compared to December of last year. 
“January marked a potential turning point in the pandemic, as we saw federal coronavirus statistics start to wane later in the month,” said Kaufman Hall Managing Director Jim Blake. “While declining COVID-19 cases and hospitalizations are a very welcome sign, the pandemic continues to create a challenging situation for hospitals and health systems.”

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