Hospitals and healthcare systems could see $323.1 billion in losses in 2020 as a result of COVID-19.
COVID losses to exceed $320 billion for US healthcare systems in 2020
July 07, 2020
by John R. Fischer, Senior Reporter
Hospitals and healthcare systems can expect losses of at least $323.1 billion in 2020 as a result of the ongoing COVID-19 pandemic.
Below baseline levels in patient volume are expected to continue, having already cost providers $202.6 billion in losses from March to June, and are projected to cost $120.5 billion at minimum in additional losses from July 2020 through December 2020, an average of $20.1 billion per month. These estimates may underrepresent the full financial losses hospitals are expected to incur throughout the year, along with expenses from pre-COVID financial strains they still face, according to a new report by the American Hospital Association.
“Even before the COVID-19 pandemic, a third of hospitals had negative operating margins,” Aaron Wesolowski, AHA’s vice president of policy research, analytics, and strategy for the AHA, told HCB News. “These losses now put unprecedented financial pressure on hospitals. Americans cannot afford the cost of closed hospitals and restricted access to lifesaving treatment — action is needed urgently to support our nation’s hospitals and health systems and the heroes who work there.”
While COVID-19 hospitalizations have generated some level of inpatient and outpatient volume, the average cost of these hospitalizations exceeds expected reimbursement, thereby exacerbating the financial difficulties facing providers.
Inpatient volume has, on average, declined by 19.5% and outpatient volume has gone down by 34.5%, relative to baseline levels from 2019. Most healthcare systems do not expect volume to reach baseline levels again in 2020, due to hesitancy among patients to seek care despite most states already having lifted stay-at-home orders and moratoriums on non-emergent care.
Further driving down volume are state and hospital policies implemented for patient safety, including restrictions on the number of beds in use, quotas on reserving PPE, and screenings for incoming patients. In addition to inpatient and outpatient visits, volume has also decreased by 43% in emergency department use, compared to the same time last year. The combination of these factors has led to drops in revenue, and sustained over several months, increased the pace of declines for hospitals with margins well below normal levels. When patient volume does start to return, the additional costs of PPE are expected to further add to financial losses among hospitals and healthcare systems.
The findings are based on responses by 1,360 hospitals to an electronic survey in early June. Participants were spread out across 48 states, Washington, D.C. and two U.S. territories, with approximately one-third making up hospitals and health systems in rural areas. All were questioned about inpatient and outpatient volume reductions below baseline levels, compared to their previous year’s volumes, and when they expect to return to baseline inpatient and outpatient volumes.
The majority (67%) said that volume would not return to baseline in 2020. Experts suggest that the pandemic could continue for at least another 12 months, prompting the AHA to estimate a return to baseline patient volume by July 2021.
Uncertainty around the total amount of losses stems from increasing case rates in certain states, the potential for subsequent surges and associated COVID-19 treatment costs later in the year, and changing trends in insurance coverage as a result of an economic downturn, all of which are not accounted for in the report. It also does not factor in increased acquisition costs for drugs, non-PPE supplies and equipment, and the long-term effects of the pandemic beyond 2020.
“Hospitals and health systems are in the midst of the greatest financial crisis in our history, as we continue to fight this pandemic at the same time that non-COVID patient visits remain down,” said AHA president and CEO Rick Pollack in a statement. “While we appreciate the support to date from Congress and the administration, this report clearly shows that we are not out of the woods. More action is needed urgently to support our nation’s hospitals and health systems and front-line staff.”
Below baseline levels in patient volume are expected to continue, having already cost providers $202.6 billion in losses from March to June, and are projected to cost $120.5 billion at minimum in additional losses from July 2020 through December 2020, an average of $20.1 billion per month. These estimates may underrepresent the full financial losses hospitals are expected to incur throughout the year, along with expenses from pre-COVID financial strains they still face, according to a new report by the American Hospital Association.
“Even before the COVID-19 pandemic, a third of hospitals had negative operating margins,” Aaron Wesolowski, AHA’s vice president of policy research, analytics, and strategy for the AHA, told HCB News. “These losses now put unprecedented financial pressure on hospitals. Americans cannot afford the cost of closed hospitals and restricted access to lifesaving treatment — action is needed urgently to support our nation’s hospitals and health systems and the heroes who work there.”
While COVID-19 hospitalizations have generated some level of inpatient and outpatient volume, the average cost of these hospitalizations exceeds expected reimbursement, thereby exacerbating the financial difficulties facing providers.
Inpatient volume has, on average, declined by 19.5% and outpatient volume has gone down by 34.5%, relative to baseline levels from 2019. Most healthcare systems do not expect volume to reach baseline levels again in 2020, due to hesitancy among patients to seek care despite most states already having lifted stay-at-home orders and moratoriums on non-emergent care.
Further driving down volume are state and hospital policies implemented for patient safety, including restrictions on the number of beds in use, quotas on reserving PPE, and screenings for incoming patients. In addition to inpatient and outpatient visits, volume has also decreased by 43% in emergency department use, compared to the same time last year. The combination of these factors has led to drops in revenue, and sustained over several months, increased the pace of declines for hospitals with margins well below normal levels. When patient volume does start to return, the additional costs of PPE are expected to further add to financial losses among hospitals and healthcare systems.
The findings are based on responses by 1,360 hospitals to an electronic survey in early June. Participants were spread out across 48 states, Washington, D.C. and two U.S. territories, with approximately one-third making up hospitals and health systems in rural areas. All were questioned about inpatient and outpatient volume reductions below baseline levels, compared to their previous year’s volumes, and when they expect to return to baseline inpatient and outpatient volumes.
The majority (67%) said that volume would not return to baseline in 2020. Experts suggest that the pandemic could continue for at least another 12 months, prompting the AHA to estimate a return to baseline patient volume by July 2021.
Uncertainty around the total amount of losses stems from increasing case rates in certain states, the potential for subsequent surges and associated COVID-19 treatment costs later in the year, and changing trends in insurance coverage as a result of an economic downturn, all of which are not accounted for in the report. It also does not factor in increased acquisition costs for drugs, non-PPE supplies and equipment, and the long-term effects of the pandemic beyond 2020.
“Hospitals and health systems are in the midst of the greatest financial crisis in our history, as we continue to fight this pandemic at the same time that non-COVID patient visits remain down,” said AHA president and CEO Rick Pollack in a statement. “While we appreciate the support to date from Congress and the administration, this report clearly shows that we are not out of the woods. More action is needed urgently to support our nation’s hospitals and health systems and front-line staff.”