Omicron Variant Takes Heavy Toll on Hospitals in January, Kaufman Hall Reports

The omicron coronavirus variant forces hospitals to endure lower revenue and higher expenses.

The omicron coronavirus variant wreaked havoc on U.S. hospitals in January, according to a new National Hospital Flash Report from Kaufman, Hall & Associates LLC.

The omicron variant has fueled the latest surge in the coronavirus pandemic. The omicron variant was first detected in the United States on Dec. 1, 2021, and by Jan. 15, 2022, the variant accounted for 99.5% of sequenced specimens in the country, according to the Centers for Disease Control and Prevention. The highest daily 7-day moving average of cases during the pandemic was reported during the week of Jan. 9, 2022, at 798,976 daily cases, the CDC says.

The omicron variant had a damaging impact on hospital finances in January, the new National Hospital Flash Report says. "Hospital margins declined dramatically as many providers temporarily halted nonurgent procedures, the numbers of inpatients requiring longer hospital stays rose, and expenses continued to climb due to widespread staffing and supply chain issues," the report says.

The report is based on data collected from more than 900 hospitals. The report features several key data points.

• The median Kaufman Hall Operating Margin Index for hospitals in January was -3.68%, without Coronavirus Aid, Relief, and Economic Security Act funding. With CARES funding, the median operating margin index was -3.3%.
   
• The median change in operating margin dropped 71.3% from December to January, not including CARES funding. The median change in operating margin was down 23.7% compared to January 2021.
   
• The omicron surge decreased outpatient care volume as hospitals and patients delayed nonurgent procedures to avoid spreading the virus and COVID-19 hospital admissions spiked. From December to January, operating room minutes fell 15.7%. Compared to before the pandemic in January 2020, operating room minutes were down 20.4% in January.
   
• In January, there was an increase in severely ill patients requiring longer hospital stays. From December to January, average length of stay rose 8.6%. Compared to January 2021, average length of stay rose 4.9%.
   
• From December to January, outpatient revenue fell 7.5%, which drove a 4.7% month-over-month decline in gross operating revenue, without CARES funding. Gross operating revenue declined despite a 2.7% rise in inpatient revenue from December to January.
   
• Wage pressure associated with workforce shortages as well as global supply chain problems drove hospital expenses higher. From December to January, total expense per adjusted discharge increased 11.6%, with labor expense per adjusted discharge increasing 14.6%. From December to January, non-labor expense per adjusted discharge increased 7.8%.
   
• Expenses were up precipitously compared to pre-pandemic levels. Compared to January 2020, total expense per adjusted discharge rose 43.5%, labor expense per adjusted discharge rose 57%, and non-labor expense per adjusted discharge rose 35.5%.

"The first month of 2022 was devastating for hospitals and health systems nationwide as they were hit full force by the omicron tidal wave. COVID-19 cases and hospitalizations peaked at record levels in January due to rapid spread of the highly contagious variant," the report says.