News: America’s healthcare system projected to lose $54 billion in net income in 2021, analysis shows

CDI Strategies - Volume 15, Issue 44

Sicker patients, fewer outpatient visits, and higher expenses for labor, drugs, and supplies will continue to damage the financial health of hospitals and health systems throughout 2021, says an analysis released by the AHA as prepared by Kaufman, Hall & Associates, LLC.

Hospitals nationwide will lose about $54 billion in net income over the course of the year, even after considering federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding from last year, HealthLeaders reported.

Because these projections were made based on hospital performance data in the first and second quarters of 2021, before the latest COVID surge, hospitals may face even greater financial challenges because of the uncertain trajectory of the Delta and Mu variants in the United States this fall.

Contributing factors include:

  • Sicker patients. High acuity, inpatient cases—COVID-19 patients and those who put off care during the pandemic—require longer lengths of stay. While such cases may contribute to revenue increases, any gains are offset by higher care costs for treating patients with more severe conditions.
  • Higher expenses. Hospitals face increasing costs for labor, including spending a lot more resources on contract or travel nurses due to staffing shortages, as well as increased costs for drugs, purchased services, personal protective equipment (PPE), and other medical and safety supplies needed to care for higher-acuity patients.
  • Fewer outpatient visits. Hospital outpatient visits—which generally have lower expenses and higher margins—continue to increase in 2021, but remain down, compared to 2019 levels. They have yet to fully recover after plummeting with nationwide shutdowns and COVID-19 mitigation efforts in the early months of the pandemic.

In recent months, the spread of the highly contagious Delta variant has set back hospitals even more, HealthLeaders reported. The seven-day average of new hospital admissions of COVID-19 patients increased 488%, from 1,900 on June 19 to 11,168 on September 14, according to recent data from the U.S. Centers for Disease Control and Prevention.

The analysis also found that:

  • Higher costs of caring for sicker patients and fewer outpatient visits than pre-pandemic levels could lead median hospital margins to be 11% below pre-pandemic levels by year’s end.
  • More than one-third of hospitals are expected to end 2021 with negative margins.
  • If there were no relief funds from the federal government, losses in net income would be as high as $92 billion, which further emphasizes the magnitude of losses hospitals will likely continue to face through the end of 2021.

Editor’s note: This article was originally published by HealthLeaders.

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