Financial Effects of COVID-19: Hospital Outlook for the Remainder of 2021

Introduction

COVID-19 expected to drive continued hospital losses throughout 2021

America’s hospitals face significant, ongoing financial instability as the ravages of the COVID-19 pandemic continue to fester. With cases and hospitalizations at high levels in the wake of the rapid spread of the Delta variant, mostly among the unvaccinated, physicians, nurses, and other hospital personnel are working tirelessly to care for COVID-19 patients. At the same time, hospitals are experiencing profound net income losses that likely will continue throughout the rest of 2021.

Kaufman Hall projects hospitals nationwide will lose an estimated $54 billion in net income over the course of the year, even taking into account federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year.

Our latest analyses examine actual performance in the first and second quarters of this year, and projections for the remainder of 2021. According to our estimates, more than a third of U.S. hospitals will maintain negative operating margins through year’s end. However, the uncertain trajectory of the Delta and Mu variants in the U.S. this fall could result in even greater losses.

Contributing factors include:

• Sicker patients. Hospitals are seeing more high acuity, inpatient cases—including COVID-19 patients—requiring longer lengths of stay than prior to the pandemic in 2019. While such cases are contributing to revenue increases, any gains are offset by higher care costs for treating patients with more severe conditions.
• Higher expenses. Expenses are rising across the board, as hospitals face increasing costs for labor, drugs, purchased services, personal protective equipment (PPE), and other medical and safety supplies needed to care for higher acuity patients.
• Fewer outpatient visits. Hospital outpatient visits—which tend to have lower expenses and higher margins—continue to grow, but remain depressed compared to 2019 levels. They have yet to fully recover after plummeting with nationwide shutdowns and COVID-19 mitigation efforts in the early months of the pandemic in 2020.

These latest findings reaffirm the results discussed in Kaufman Hall’s March report. Details on our key findings are discussed in the following pages.

Click on the PDF link below to download the full report.

This report was prepared at the request of the American Hospital Association.