Health Care Faces Financial Challenges During the Pandemic

COVID-19 continues to spread throughout much of the country. Many states are experiencing spikes in cases. Media outlets report a daily total of confirmed cases, hospitalizations and deaths from the virus. But the financial havoc the pandemic is wreaking on hospital and health system finances is only beginning to be understood.

[image here]A new analysis, prepared by Kaufman, Hall & Associates LLC and released by the AHA, highlights the dire impact of the COVID-19 crisis on the financial health of hospitals and health systems. Without further government support, margins could sink to -7% in the second half of the year, according to the analysis, with half of all hospitals operating in the red.

Without the coronavirus relief bill funding, hospital margins would have been -15% in the second quarter. However, even with these funds, hospital margins were still expected to drop to -3% in the second quarter. Before COVID-19, the median hospital margin was a modest 3.5%.

AHA President and CEO Rick Pollack says that the analysis confirms the pandemic “is the greatest financial threat in history for hospitals and health systems and is a serious obstacle to keeping the doors open for many,” while calling on the Administration and Congress to provide further help so that hospitals can stay afloat and continue their mission of caring for patients and communities.

AHA case studies document how hospitals and health systems large and small have been negatively impacted operationally and financially by the crisis. In one report, Arizona-based Banner Health Chief Financial Officer Dennis Laraway notes that his organization projects operating losses of $500 million for 2020, with expected revenue losses approaching $1 billion for the year, exclusive of federal relief.

The impact has been no less severe on small and rural health systems, the case studies explain. Canandaigua, N.Y-based UR Medicine Thompson Health, a nonprofit system that provides care for 165,000 residents of Upstate New York’s greater Finger Lakes area, projects losses of $17 million through year end.

For both Banner Health and Thompson Health, the losses incurred from shutting down many elective surgeries and other so-called nonessential services are having lasting impacts. They note that additional federal funding is urgently needed to create a financial bridge to help them through this crisis.