How Did Commercial Payments for COVID-19 Inpatient Stays Vary in 2020?

Commercial payments for inpatient stays associated with COVID-19 in 2020 were higher for health system-affiliated and high-quality hospitals, a study published in JAMA Health Forum found.

When the COVID-19 pandemic hit in March 2020, the overall volume of hospital inpatient admissions fell due to the decline in non-COVID-19 care. This led to reduced hospital finances and the introduction of federal financial assistance for hospitals.

In addition to federal funds, reimbursement for COVID-19 care helped sustain hospitals during this time. Medicare and other public payers have posted reimbursement rates for COVID-19 care, but payment rates for patients with commercial insurance are less public.

Researchers used 2020 commercial medical claims from 11 state all-payer claims databases and over 100 self-insured employers representing all 50 states to assess commercial payments for inpatient COVID-19 care in 2020.

The study evaluated the connection between commercial allowed amounts for COVID-19 inpatient admissions and hospitals’ affiliations, CMS star ratings, and safety-net status. Allowed amounts included facility and professional services provided during each stay, capturing the transacted amount of each service.

The sample included 12,183 inpatient stays at 1,760 hospitals for commercially insured patients with the diagnosis code corresponding to COVID-19. The mean length of stay was six days.

The mean commercial allowed amount for the inpatient stays was $32,985, with a median of $21,190. The mean allowed amount per day was $7,895 and the median was $5,216. The mean ratio of commercial to Medicare allowed amounts was 2.43, while the median was 2.14.

After adjusting for patient age, sex, number of claims, and length of stay, the commercial allowed amounts for COVID-19 inpatient stay were higher for certain hospitals. Hospitals affiliated with a health system that owned five or more acute hospitals had the highest commercial payments at $3,562. High-quality hospitals with a four- or five-star rating followed with $2,931.

The commercial allowed amount among for-profit hospitals was $2,848. Meanwhile, the commercial allowed amount was $2,071 for safety-net hospitals and $1,909 for teaching hospitals.

“As policymakers seek to provide equitable financial assistance to hospitals, it is important to recognize that hospitals received widely varied amounts for COVID-19 care and, when appropriate, to adjust for differences in payment rates to ensure that hospitals with less resources receive adequate assistance,” the researchers wrote.

Federal relief funds played a significant role in helping hospital profit margins remain stable in 2020. Between 2019 and 2020, profit margins increased from 3.7 percent to 7.2 percent at government hospitals, 1.9 percent to 7.5 percent at rural hospitals, and 3.5 percent to 6.7 percent at smaller hospitals.

At the same time, hospital operating margins plummeted, falling from -1.0 percent in 2019 to -7.4 percent in 2020. Margins remained negative throughout 2022 and have just begun to stabilize in 2023.