Hospital revenues could plunge as much as $122B in wake of pandemic
Under the most optimistic scenario, the loss would be at least $53 billion.
U.S. hospitals could lose tens of billions of dollars in revenue this year even under the most optimistic scenario, according to a new report prepared on behalf of the American Hospital Association.
“In 2020, COVID-19 undermined our nation’s health and severely tested our hospitals and health systems,” according to researchers for Kaufman Hall, which prepared the report. “At the same time that a series of spikes in COVID-19 cases and hospitalizations put intense pressure on hospital staff and resources, steep declines in non-COVID-19 volume led to sharply lower revenues.”
Related: Preliminary data: Health spending in 2020 declined for first time since 1960
The report considered several interconnected factors to gauge the potential effect on revenues:
- Recovery of hospital volumes, which is the degree and pace at which inpatient, outpatient and emergency department volumes return.
- COVID-19 vaccine progress, including the availability of vaccines, the speed of distribution and the prioritization of different populations for vaccination.
- Decline in COVID-19 cases, based on the degree and pace at which COVID-19 cases decline, public use of social distancing and achievement of herd immunity
Regardless of the outcomes, hospitals are expected to lose massive amounts revenue this year.
Under an optimistic scenario, hospitals could face a $53 billion total revenue loss in 2021. This scenario includes:
- Consistent, complete recovery of volumes. Consumers and hospitals return to pre-COVID volumes and revenue.
- Quick vaccine progress. Supply, distribution and administration are not delayed; at-risk individuals are prioritized over others.
- Sustained ramp-down of COVID cases. Residents continue to social distance until herd immunity is achieved and social distancing is no longer required.
Under a pessimistic scenario, hospitals could face a $122 billion total revenue loss in 2021. This scenario assumes:
- Slow, partial recovery of volumes. Consumers and hospitals adapt to a “new normal” for volumes and revenue.
- Slow vaccine progress. Vaccine supply and distribution are delayed, with continued administration challenges.
- Cyclical COVID surges. Residents stop social distancing before herd immunity is achieved, which contributes to a cyclical rise in COVID-19 cases and hospitalizations.
“In 2021, COVID-19 will continue to undermine the financial health of America’s hospitals,” the report concluded. “Before COVID-19, America’s hospitals were experiencing downward revenue pressure from both government and commercial payers, resulting in a very thin 2.5% median margin in 2019, according to the Kaufman Hall Operating Margin Index. At the same time, hospitals have been challenged to invest heavily in digital health and other forward-looking capabilities, which emerged as critical when COVID-19 struck.
“Our forecast that total hospital revenues in 2021 could be down between $53 billion and $122 billion (4% to 10% of total revenue) is bad news, indeed. 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.”
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