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New Kaufman Hall Flash Report: Hospital Margins Down 96 Percent

August 26, 2020

A Kaufman Hall National Hospital Flash Report released Monday shows the overwhelming financial impact that COVID-19 has had on U.S. hospitals. July marked the fifth consecutive month of volumes that fell below 2019 and below budget, further devastating hospitals’ financial stability.

According to the report, operating margins fell 96 percent during the first seven months of 2020, when compared to the same period during 2019. Even with federal assistance from the Coronavirus Aid, Relief, and Economy Security (CARES) Act, operating margins still were down 28 percent through July.

During recent months, hospitals have shown limited signs of recovery even as non-emergent surgeries and other procedures have begun to move forward. In the face of significant hesitancy by patients to seek care and reduced capacity as a result of new care protocols, 2020 patient volumes remain below 2019 for the period of January through July:

  • Adjusted discharges are down 13 percent year-to-date
  • Adjusted patient days are down 11 percent
  • Hospital emergency room volumes fell 17 percent
  • Surgery volumes remain down about 15 percent

In addition to the significant decrease in revenue, hospital expenses during the same seven-month period increased:

  • Total expense per adjusted discharge increased 16 percent
  • Labor expense per adjusted discharge increased 18 percent
  • Non-labor expense per adjusted discharge increased 15 percent

During July, a related report from the American Hospital Association prepared by Kaufman Hall, The Effect of COVID-19 on Hospital Financial Health, states, “Our forecast shows that, without further government support, margins could sink to –7 percent in the second half of 2020. This is an unsustainable level for America’s hospitals.”

While federal support has been crucial in helping hospitals manage decreased volumes and increased expenses, Pennsylvania hospitals are coping with unprecedented losses while facing the threat of a second wave of COVID-19, possibly during this year’s flu season. HAP has urged state lawmakers to dedicate CARES Act resources to hospitals and continues to work with federal lawmakers on additional relief measures:

  • Liability protections for front-line workers and hospitals
  • Additional support to health care providers, such as tax-free child care, housing, transportation, and education benefits
  • Financial assistance to businesses impacted by COVID-19 to ensure health insurance coverage to employees

HAP will continue to work with state and federal officials toward providing support to Pennsylvania’s hospitals and health systems and their frontline workers.

For more information, contact Warren Kampf, HAP’s senior vice president, advocacy and external affairs, or Kate Slatt, HAP’s vice president, innovative payment and care delivery.