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Delta Coronavirus Variant Wreaking Havoc on Hospital Finances, Report Says

Analysis  |  By Christopher Cheney  
   October 01, 2021

The Delta variant, which is highly transmissible, has led to a surge of COVID-19 patients across the country.

The spread of the Delta coronavirus variant put financial strain on health systems and hospitals through August, a new Kaufman, Hall & Associates LLC report says.

The highly transmissible Delta variant has led to a surge of COVID-19 patients nationwide. The surge has been accompanied by longer length of stay for patients in the inpatient setting and greater numbers of high acuity patients.

The Kaufman Hall report, which was published this week, features several key data points.

  • The 7-day moving average of new coronavirus cases increased 80.8% from 88,143 on Aug. 1 to 159,333 on Aug. 31, according to the Centers for Disease Control and Prevention. The 7-day moving average of new hospital admissions increased 72.3% from 7,105 on Aug. 1 to 12,243 on Aug. 31.
     
  • Hospital operating margins remained low in August. The median Kaufman Hall Operating Margin Index was 3.1% in August, not including federal CARES Act funding. With the federal aid, the operating margin index was 3.9%, which was down 11.8% from pre-pandemic levels.
     
  • Operating margins for the first eight months of 2021 were up considerably compared to the losses reported in the first eight months of 2020. Operating margin increased 83.1% year-to-date and operating EBITDA margin increased 57.1% year-to-date, not including CARES Act aid.
     
  • Key metrics for hospital volumes remained down compared to pre-pandemic levels but above 2020 levels. Adjusted discharges were down 4.8% year-to-date compared to the first eight months of 2019 but up 8.7% year-to-date compared to 2020. Emergency department visits dropped 11% year-to-date compared to 2019 but increased 7.3% year-to-date compared to the first eight months of 2020.
     
  • The average length of stay increased above 2019 and 2020 levels as hospitals experienced more high-acuity cases requiring longer hospital stays—including more severe COVID-19 cases—which also increased expenses. Average length of stay increased 7.9% year-to-date compared to 2019 and increased 4.5% year-to-date compared to 2020.
     
  • The increase in higher acuity cases boosted hospital revenues compared to both 2019 and 2020 for a sixth consecutive month. Gross operating revenue rose 9.6% year-to-date compared to 2019 and 16.6% year-to-date compared to 2020, not including CARES aid. Outpatient revenue posted the biggest increases at 10.0% year-to-date compared to 2019 and 20.3% year-to-date compared to 2020. Inpatient revenue increased 5.6% year-to-date compared to 2019 and 11.8% year-to-date compared to 2020.
     
  • Costs were higher than both 2019 and 2020 levels. Total expense per adjusted discharge increased 16.6% year-to-date compared to 2019 and 1.3% year-to-date compared to 2020. Non-labor expense per adjusted discharge increased 18.3% year-to-date compared to 2019 and 0.7% year-to-date compared to 2020. Labor expense per adjusted discharge increased 15.1% year-to-date compared to 2019 but decreased 0.1% year-to-date compared to 2020.

There is little relief in sight for hospitals this fall, the report says.

"The fall months hold continued uncertainties for hospitals and health systems. While overall cases and new hospital admissions began to taper in the first half of September, hospital officials in areas hard hit by the Delta variant said their organizations may need to ration care due to shortages in equipment, staffing, and beds to accommodate high acuity patients. With cooler temperatures coming, vaccinations waning, and increases in severe COVID-19 infections—especially among the unvaccinated—the continued pressures on the nation's hospitals are unlikely to abate anytime soon," the report says.

Related: Hospitals and Health Systems Projected to Lose About 54B in Net Income in 2021

Christopher Cheney is the senior clinical care​ editor at HealthLeaders.


KEY TAKEAWAYS

Hospital operating margins remained low in August. The median Kaufman Hall Operating Margin Index was 3.1% in August, not including federal CARES Act funding.

Key metrics for hospital volumes remained down compared to pre-pandemic levels but above 2020 levels. Adjusted discharges were down 4.8% year-to-date compared to the first eight months of 2019 but up 8.7% year-to-date compared to 2020.

Costs were higher than both 2019 and 2020 levels. Total expense per adjusted discharge increased 16.6% year-to-date compared to 2019 and 1.3% year-to-date compared to 2020.


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