Nonprofit Patient Revenue, Operating Expenses Rose Amid Delta Surge

During the Delta variant wave in the third quarter of 2021, net patient revenue and total operating expenses for nonprofit hospitals were above pre-pandemic levels, while operating income dropped to just below pre-pandemic figures, according to a report from Alvarez & Marsal (A&M).

A&M’s quarterly report reflects publicly available financial data from the 25 largest nonprofit health systems across the country. The recent data tracks trends from the beginning of 2019 through the end of Q3 2021.

Nonprofit net patient revenue dropped 22 percent from the pre-pandemic period to the second quarter of 2020, when states first implemented lockdowns in response to COVID-19. Between Q3 2020 and Q3 2021, nonprofit net patient revenue increased by 12 percent, perhaps due to the Delta variant surge and patients returning to normal healthcare utilization after lockdowns were lifted.

Nonprofits ended Q3 2021 with a 13 percent increase in net patient revenue relative to before the pandemic in Q3 2019. However, the report noted that if patient revenue had not been disrupted by the pandemic and kept rising at pre-pandemic rates, it would be 9 percent higher than the Q3 2021 level.

Operating expenses have continued to increase for nonprofit hospitals since the pandemic. From Q3 2020 to Q3 2021, operating expenses increased by 8 percent, putting the total costs at 14 percent higher than pre-pandemic levels. If pre-pandemic growth had persisted, the total operating expense would have been 4 percent higher than Q3 2021 figures.

The federal funds distributed through the Coronavirus Aid, Relief, and Economic Security (CARES) Act largely impacted operating income numbers. Nonprofit health systems received $14.7 billion in CARES Act funding during 2020. Between Q3 2020 and Q3 2021, operating income increased by 263 percent, thanks to these funds.

According to the report, CARES Act funding in 2021 was slightly smaller, leading operating income to drop 2 percent below pre-pandemic levels in Q3 2021.

While discharge volumes and patient days at the nonprofits decreased between 2019 and 2020, case surges in 2021 led to increases. Between Q3 2020 and Q3 2021, discharges rose by 2 percent, while patient days climbed 6 percent. However, Q3 2021 discharges were 4 percent below pre-pandemic levels, whereas patient days were up 5 percent compared to pre-pandemic times.

Length of stay continued to grow during the pandemic, with nonprofits seeing a 6 percent increase between 2019 and 2020 and a 5 percent increase between Q3 2020 and Q3 2021. Additionally, the length of stay was more than half a day longer in Q3 2021 than before the pandemic.

The longer length of stay, more patient days, and fewer discharges reflect the higher acuity of patients during the pandemic, the report noted.

Surgery volumes during Q3 2021 saw some recovery, falling just 5 percent below pre-pandemic levels and increasing 11 percent between 2020 and 2021. However, if pre-pandemic growth had continued, surgery volumes would have been 24 percent higher.

Emergency room visits also essentially returned to pre-pandemic levels, with volumes just 3 percent below 2019 figures in Q3 2021. This may signal a permanent shift in emergency department utilization, as patients found other ways to receive healthcare during the pandemic, which lessened their dependence on the emergency room, the report suggested.

Nonprofit health systems typically report their financial statements between three and six months after a quarter ends, meaning the data for Q4 2021 and Q1 2022 are not available yet. However, researchers predicted that the Omicron variant surge at the beginning of 2022 will have hurt nonprofit hospital financial performances.

Data from Kaufman Hall revealed that hospitals—including for-profit and nonprofit health systems—saw rising expenses coupled with declines in revenue, operating margins, and outpatient volumes in January 2022 due to the Omicron surge.

Following the surge, hospitals saw temporary expense relief in February but experienced negative margins for a second consecutive month and declining revenue and patient volumes.