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Hospital Revenues in 2021 Could Drop $122B Below Pre-pandemic Levels

Analysis  |  By John Commins  
   February 24, 2021

A new forecast suggests that pandemic-related financial stressors will continue well into the new year and could threaten patient care access. 

Hospital revenues in 2021 are projected to fall between $53 billion and $122 billion from pre-pandemic levels as COVID-19 continues to wreak havoc with higher costs, lower volumes and tighter margins.

That's according to a new forecast released Wednesday by the American Hospital Association and prepared by Kaufman, Hall & Associates, LLC, which projects that the pandemic-caused financial pressures on hospitals could slow vaccine administration, further fatigue exhausted front-line caregivers, and reduce care access, particularly in rural areas.

Rick Pollack, AHA president and CEO, said the report shows that "hospitals need additional support to continue to provide access to care and to help get as many vaccine shots into arms quickly."

"When we talk about the historic financial challenges hospitals face, it's about more than dollars and cents," Pollack said. "It's really about making sure hospitals and health systems have the resources needed to provide essential services for their patients and communities."

The KH report offers best case / worse case scenarios for hospital revenues.

Under the "optimistic scenario" hospitals will lose $53 billion in 2021 with an assumption that patient volumes recover completely, vaccine administration goes smoothly, and the nation sees a decline in the number of COVID-19 cases.

Under the "pessimistic scenario" hospitals will bleed $122 billion in revenues if there is only a partial recovery in patient volumes, the vaccine rollout is bungled or delayed, and COVID-19 cycles through additional surges.

In addition to falling revenues, hospitals in 2021 will also likely bear additional costs for medicines and supplies, KH projects.

The report notes that, when compared with 2019, drug expenses per adjusted discharge are up 17% as patients being admitted to hospitals and health systems increased in severity and required more therapeutics, including COVID-19 patients.

In addition, purchased service expenses per adjusted discharge are up 16% when compared with 2019, as hospitals required specialized functions such as environmental services and sterilizing facilities for COVID-19 patients.

Labor expenses per adjusted discharge are also up 14% because of the increased use in contract labor, hazard pay and other expenses for maintaining a workforce.

Supply expenses per adjusted discharge also is up 13% as hospitals scaled up their purchasing of PPE and other equipment to safely treat their patients. Shortages in 2020 increased the price for many of these items.

"During the pandemic, people have put off needed care, in some cases to the detriment of their health," Pollack said. "In addition, the costs of labor and supplies have increased, adding to financial stress."

On Monday, KH released a separate report noting that even as COVID-19 cases and deaths declined in January, the pandemic continued to dampen volumes, margins, and outpatient revenues of hospitals during the first month of 2021.

The median hospital operating margin for January was –0.6%, not including federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. With CARES funding, it was –0.1%, according to KH's National Hospital Flash Report for February, which examines data from more than 900 hospitals.

In June 2020, AHA projected that hospitals would lose more than $20 billion a month for the rest of 2020. Those losses, combined with an estimated $202.6 billion in red ink that hospitals booked between March and June, mean that hospitals could see losses of $323.1 billion or more in 2020, the report said.

Editor's note: This story was updated on February 26, 2021.

“When we talk about the historic financial challenges hospitals face, it’s about more than dollars and cents. It's really about making sure hospitals and health systems have the resources needed to provide essential services for their patients and communities.”

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

Under the "optimistic scenario" hospitals will lose $53 billion in 2021 with an assumption that patient volumes recover completely, vaccine administration goes smoothly, and the nation sees a decline in the number of COVID-19 cases.

Under the "pessimistic scenario" hospitals will bleed $122 billion in revenues if there is only a partial recovery in patient volumes, the vaccine rollout is bungled or delayed, and COVID-19 cycles through additional surges.


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