COVID-19 Hospital Revenue Losses Could Reach Up to $122B in 2021

Total hospital revenue will take a significant hit compared to pre-pandemic levels, spelling trouble for ongoing COVID-19 vaccination efforts, according to a new analysis.

The analysis prepared by Kaufman, Hall & Associates, LLC and released by the American Hospital Association (AHA) yesterday showed that hospitals and health systems could collectively lose $53 billion in revenue in 2021 under the most optimistic scenario.

But that could increase to as much as $122 billion in losses if hospitals and health systems continue to experience slow, partial recovery of volumes, a slow vaccine rollout, and cyclical COVID-19 surges.

The scenarios translate to losses of 4 percent to 10 percent of total hospital revenue, which even in the best case is “bad news” for hospitals and health systems, researchers said in the analysis.

“Whether recovery from COVID-19 in 2021 is relatively rapid or relatively slow, America’s hospitals will face another year of struggle to regain their financial health while providing necessary care and services to a nation that is continuing to experience the effects of an unprecedented pandemic,” the analysis stated.

Hospitals and health systems have already started the year off on shaky ground.

New data from Epic Health Research Network (EHRN) and Kaiser Family Foundation (KFF) recently showed that hospital admissions for reasons other than COVID-19 have declined again after a partial recovery this summer, suggesting that patients are delaying care and hospitals are suffering financially because of it.

Additionally, a separate Kaufman Hall report released earlier this month showed depressed hospital operating margins, volumes, and revenues, while expenses for labor, drugs, and personal protective equipment continued to be higher than normal.

The latest analysis also found increases in certain expenses because of COVID-19, with the largest increase at 17 percent being for prescription drugs in 2020.

“Hospitals saw their volume-adjusted drug expenses increase, as the patients being admitted to the hospitals increased in severity and required more therapeutics, including COVID-19 patients,” researchers stated.

Other expense increases included purchase services at 16 percent, labor at 14 percent, and supply at 13 percent.

These expense pressures could very well persistent into 2021, researchers explained, as the number of COVID-19 cases remains high in the new year and new variants emerge.

Combined, higher expenses and revenue losses paint a less-than-ideal picture for hospitals and health systems as well as their communities, the AHA indicated.

“When we talk about the historic financial challenges hospitals face, it’s about more than dollars and cents, it’s really about making sure hospitals and health systems have the resources needed to provide essential services for their patients and communities,” Rick Pollack, AHA president and CEO, said in a press release.

“During the pandemic, people have put off needed care, in some cases to the detriment of their health. In addition, the costs of labor and supplies have increased, adding to financial stress,” Pollack continued. “Vaccines give us hope that the end is in sight, but hospitals need additional support to continue to provide access to care and to help get as many vaccine shots into arms quickly.”

According to new reports, the hospital group has called on lawmakers to include emergency funding for hospitals in a $1.9 trillion COVID-19 relief plan set to pass the House on Friday.

AHA requested $35 billion in targeted emergency funding, per Bloomberg Law. The group also called on the House to consider loan forgiveness as part of the new bill.

Hospitals and other provider organizations have already received most of the $178 billion put aside in emergency funding for healthcare providers from previous COVID-19 stimulus packages. But with just $4.4 billion left in funding, according to the report, hospital leaders are pushing for more financial aid.

Many hospitals and health systems are also on the verge of repaying loans given to them through the Medicare Accelerated and Advance Payment Programs at the start of the pandemic even though Medicare volumes remain low.

According to the analysis from Kaufman Hall, researchers project hospital outpatient revenue to contribute the most to overall revenue losses, between $27 billion and $64 billion depending on the scenario.

Meanwhile, inpatient revenue is slated to decline by $17 billion to $41 billion, and emergency department revenue between $9 billion and $17 billion.