Analysis Reveals Extent of COVID-19 Damage to U.S. Healthcare Finances

By Jonathan Springston, Editor, Relias Media

COVID-19 has wrought havoc on America’s healthcare system, and the situation could grow worse. An analysis released this week estimates that without additional federal assistance, margins for U.S. hospitals could decline to -7% in the second half of 2020.

“When the COVID-19 pandemic emerged, hospitals had to stop all but the most urgent non-COVID care. The result was a dramatic slowdown in volume of patients and in revenue, while expenses remained high,” analysts from Kaufman, Hall & Associates wrote. “To date, no one knows when and to what degree these patients will return. The result has been an unprecedented impact and an uncertain future about the ability of hospitals to serve their communities and remain financially viable.”

Before COVID-19 emerged, Kaufman Hall analysts noted, the median margin for U.S. hospitals was a “modest” 3.5%. But in the first quarter of 2020, that figure immediately dipped below -2%, with forecasts estimating the figure to reach -3% for the end of the second quarter. Without federal assistance, the damage could have been much worse. Kaufman analysts acknowledged funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act distributed throughout the second quarter plugged some holes. If the CARES Act had not become law, margins could have plunged to -15%.

Still, -7% is considered “unsustainable,” according to the Kaufman Hall analysis. Under “the most optimistic scenario,” median margins could be -1% by the fourth quarter; pessimistic estimates put that figure at -11%. What happens depends not only on to what extent the nation brings COVID-19 under control but also how much additional relief funding the federal government will provide.

“This pandemic is the greatest financial threat in history for hospitals and health systems and is a serious obstacle to keeping the doors open for many,” American Hospital Association President and CEO Rick Pollack said in a statement. “While we appreciate the support from the administration and Congress, we need further help to stay afloat to continue our mission of caring for patients and communities.”

For all the latest Relias Media COVID-19 pandemic coverage, please click here.