New AHA analysis shows COVID-19’s dramatic impact on financial health of hospitals and health systems

A new analysis prepared for the AHA by Kaufman, Hall & Associates LLC highlights COVID-19’s dire impact on hospitals’ and health systems’ financial health. According to the July 21 report, without further government support, hospitals’ margins could sink to –7% in the second half of 2020, with half of all hospitals operating in the red.

The analysis also concluded:

• Without Coronavirus Aid, Relief, and Economic Security Act funding, hospital margins would have been –15% in the second quarter of 2020. However, even with these funds, hospital margins are still expected to drop to –3% in the second quarter of 2020.
• In the most optimistic scenario, which assumes a slow and steady decrease in COVID-19 cases, median margins could be –1% by the fourth quarter of 2020.
• Under another scenario that assumes periodic COVID-19 surges similar to the current case increases, margins could sink to –11%.

On a July 21 call with media, leaders from AHA member hospitals cited utilization declines from early-in-the-pandemic restrictions that barred so-called elective surgeries and a significant amount of outpatient services, noting that while some of this volume has returned, hospitals’ essential and elective surgeries remain well below pre-pandemic levels.

“Our visits have only come back halfway from that initial 38% reduction,” said John Haupert, CEO of Atlanta-based Grady Health System and a member of the AHA Board of Trustees. “We're now still off our baseline by 19%. Part of what we're seeing there is reluctance of patients to come to the hospital or to seek services in emergency departments. As patients are returning to the ER, many have significantly exacerbated chronic disease conditions — hypertension, diabetes, congestive heart failure, pulmonary disease — because they have not sought the care they needed.”

David Perlstein, M.D., president and CEO of SBH Health System in the Bronx, told the media that patients’ post-COVID-19 fear of hospitals has resulted in the majority of care being delivered electronically, particularly in ambulatory areas.

Sheila Currans, CEO of Harrison Memorial Hospital in Cynthiana, Ky., noted that during a good year her hospital operates at a 0.6% margin; currently, her facility is facing a 25% loss. Without federal intervention via the CARES Act, Currans said, “we would have been worrying about whether we could even keep the doors open.”