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COVID-19 and Hospital Financial Viability in the US
Yang Wang1, Ge Bai1,2, Gerard Anderson1,3,4
1Department of Health Policy and Management, Johns Hopkins Bloomberg School of Public Health, Baltimore, Maryland.
Insights
COVID-19 pandemic subsidies helped hospitals maintain financial stability. Despite lower operating margins, government relief funds offset losses, ensuring overall profitability for most US hospitals in 2020.
Area of Science:
- Health Services Research
- Health Economics
- Public Health Policy
Background:
- The COVID-19 pandemic significantly disrupted hospital operations, leading to financial challenges.
- Congress allocated substantial subsidies to support healthcare facilities during the crisis.
- The effectiveness of these subsidies in offsetting financial losses remained uncertain.
Purpose of the Study:
- To evaluate the impact of the COVID-19 pandemic on hospital financial performance.
- To determine if government subsidies were sufficient to maintain hospital financial viability.
Main Methods:
- A cross-sectional study analyzing data from 1378 US hospitals (January fiscal year start) and 785 (July fiscal year start).
- Utilized RAND Hospital Data, derived from Medicare Cost Reports, for continuous observations from 2016 to 2020.
- Data analysis was conducted on March 12, 2022.
Main Results:
- Hospitals experienced a significant decline in mean operating margins in 2020 (e.g., -7.4% for January fiscal year start hospitals).
- The share of nonoperating income increased substantially in 2020.
- Overall profit margins remained stable compared to prior years, with government, rural, and smaller hospitals showing improved margins in 2020.
Conclusions:
- COVID-19 relief funds effectively compensated for operational financial losses, maintaining overall hospital profitability.
- Government, rural, and smaller hospitals benefited disproportionately from targeted fund allocations, enhancing their financial performance.
Importance:
The COVID-19 pandemic has had a negative association with hospital operations. To help health care facilities and clinicians stay financially viable during the COVID-19 pandemic, Congress provided $175 billion in subsidies. It remains unclear how much financial losses hospitals incurred owing to operational disruptions during the COVID-19 pandemic and whether subsidies were sufficient to offset the financial losses.
Objective:
To assess changes in the operational financial performance and overall financial viability of hospitals during the COVID-19 pandemic.
Design Setting And Participants:
This cross-sectional study included 1378 US hospitals whose fiscal years began in January and 785 hospitals whose fiscal years began in July (all with continuous observations from 2016 through 2020). RAND Hospital Data, a compiled and processed version of Medicare Cost Reports, were used. The data were analyzed on March 12, 2022.
Exposures:
The operational disruptions experienced and relief funds received by US hospitals during the COVID-19 pandemic.
Main Outcomes And Measures:
A hospital's annual operating margin, overall profit margin, and other nonoperating income as a share of total revenue from January 2016 to December 2020.
Results:
Among the 1378 hospitals with fiscal years beginning in January, the mean operating margin declined from -1.0% (95% CI,-1.9% to -0.1%) in 2019 to -7.4% (95% CI, -8.5% to -6.3%) in 2020. The mean share of other nonoperating income grew from 4.4% (95% CI, 4% to 4.7%) in 2019 to 10.3% (95% CI, 9.9% to 10.8%) in 2020. The mean overall profit in 2020 (6.7%; 95% CI, 5.4% to 8.1%) remained as stable as prior years. Government, rural, and smaller hospitals showed higher mean overall profit margins in 2020 than in 2019 (7.2% vs 3.7%, 7.5% vs 1.9%, and 6.7% vs 3.5%, respectively). These results remained consistent when hospitals whose fiscal years began in July were examined.
Conclusions And Relevance:
The results of this cross-sectional study suggest that although hospitals experienced a sizeable reduction in operating margins in 2020, their overall profit margins remained similar to those in prior years, suggesting that the COVID-19 relief fund effectively offset the financial losses for hospitals during the COVID-19 pandemic. Government, rural, and smaller hospitals, which were supported by some targeted fund allocations, generated higher overall profit margins during 2020 than in prior years.
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