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New AHA Report Highlights Financial Toll of COVID-19 on Hospitals

July 22, 2020

Yesterday, the American Hospital Association released a report prepared by Kaufman, Hall & Associates analyzing the impact of COVID-19 on the financial status of hospitals and health systems. 

The report finds that:

  • Median margins are expected to drop to -3 percent for the second quarter of 2020; without CARES Act funding, the margins would have been -15 percent
  • Without additional financial support, the report finds that half of the nation’s hospitals may have negative margins for the second half of 2020 with overall margins of -7 percent

The report details several scenarios including those with an optimistic view of steady and decreasing COVID-19 cases and those that assume continued surges throughout the remainder of the year and in all cases, an overall negative margin is expected to prevail. Prior to the health emergency, the median hospital margin was 3.5 percent. 

Many Pennsylvania hospitals came into this crisis already operating on a razor’s edge and now are struggling to stay financially afloat. A recent state analysis of hospital financial performance found that, during fiscal year (FY) 2019, 34 percent of Pennsylvania’s hospitals operated in the red; another 29 percent reported operating margins of zero to 4 percent. The report also found that foregone value of care for which hospitals do not receive payment (uncompensated care) rose 9.3 percent, from $750 million during FY 2018 to $820 million during FY 2019. We anticipate that this will continue to rise as more Pennsylvanians lose their employer-sponsored health insurance.

The report supports findings from a HAP-commissioned study by Health Management Associates that projected Pennsylvania’s hospitals would incur a $10.2 billion financial impact from the costs of preparing for and responding to COVID-19 during 2020.

HAP continues to work with state and federal leaders to underscore the urgent need for support to help Pennsylvania’s hospitals remain financially stable, so that they can continue to address the short- and long-term needs of the communities they serve.

For more information, contact Laura Stevens Kent, HAP’s senior vice president, strategic integration.