COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
Revenues across U.S. hospitals could be at least $53 billion lower in 2021 compared to pre-pandemic levels, according to a new study commissioned by the American Hospital Association as it asks lawmakers to boost COVID-19 relief funding.
Regional health systems are still dealing with the fallout from delaying non-urgent procedures, depressed volumes, higher expenses as well as the physical and mental health toll of COVID-19 on their staff, provider executives said on a call with reporters Wednesday. Hospitals could experience a $53 billion decline in revenue this year if the vaccine is distributed effectively, volumes recover quickly and if COVID-19 cases continue to decline; those estimates rise to $122 billion in the worst-case scenario, according to Kaufman Hall’s analysis.
While COVID-19’s impact extends beyond finances, Charleston Area Medical Center and Health System in West Virginia incurred $108 million of COVID-related expenses in 2020 and it only received $74 million in COVID-19 relief grants, CEO David Ramsey said. The system is on track to lose about $5 million in February, he said.
“While CARES Act money has been critically important, it did not negate the financial difficulties,” said Ramsey, adding that expenses like the high prices of personal protective equipment continue to drag the system’s finances.
The AHA is asking lawmakers to add $35 billion to the Provider Relief Fund in the Biden administration’s $1.9 trillion stimulus package that advanced out of the House Budget Committee on Monday. There is about $4.4 billion left in the fund for hospitals, nursing homes, physician groups and other providers, AHA CEO Rick Pollack said.
“This is not about preserving operating margins, it’s about preserving lives,” he said, adding that AHA is also asking Congress to continue to delay the 2% annual cuts to Medicare payments via sequestration.
Some large health systems, particularly the investor-owned systems in growing markets, are faring relatively well amid the pandemic. HCA Healthcare, for instance, plans to return all of its $1.6 billion in federal COVID-19 relief grants as well as $4.4 billion of its Medicare accelerated payments. But that isn’t indicative of the regional health systems and community hospitals, provider executives said.
Pollack noted that 19 rural hospitals have closed in 2020 and four have filed for bankruptcy. Hospitals’ total losses exceeded $300 billion last year, according to an AHA report published last summer. Kaufman Hall’s recent related report on hospital volumes found that providers’ median operating margin dropped 55.6% in 2020 without CARES Act funding and declined 16.6% with CARES Act funding.
Many providers are struggling to source or retain staff. Labor expenses per adjusted discharge were up 14% in 2020 due to the demand for contract labor, hazard pay and other related expenses, according to the Kaufman Hall report commissioned by the AHA.
Tucson Medical Center has had to pay contract nurses $150 an hour, up from the typical rate of $48 per hour, CEO Judy Rich said. Its turnover has nearly doubled from 9% to 17% as nurses struggle to cope with COVID-19 and pick up extra shifts while educating their kids, she said.
“The death we have seen—94 intensive-care patients died in January—is debilitating to nurses,” Rich said.
While there are fewer patients visiting the ED, they are sicker, which is straining resources, she said. Average length of stay has increased from around four days to more than five.
While Tucson Medical Center has seen a significant decline in COVID-19 cases over the past three weeks, it is now trying to “pick up the pieces,” Rich said.
“We cannot get ahead of this illness and the severity of this illness,” she said. “People are leaving nursing. We are trying everything we can to keep people encouraged and get them the benefits they need, we’re even funding a (kindergarten through 6th grade school) so staff could come to work.”
Three or four nurses at Rochester Regional Health in New York are leaving each day on average, said Hugh Thomas, chief administrative officer and general counsel. That has contributed to an additional $2.5 million to $3 million in nursing costs alone, he said.
In addition to labor expenses, drug expenses per adjusted discharge were up 17% in 2020, according to the report. Purchased services, including environmental services and sterilization, per adjusted discharge were up 16% and supply chain expenses per adjusted discharge were up 13%.
Americans are still reluctant to visit hospitals, with emergency departments typically experiencing the largest volume declines.
“We are climbing out of it, but it’s going to be a long haul as we return to normal operations,” Thomas said.