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Hospitals Entering 'Grave Period' of COVID-19 Pandemic

Analysis  |  By Jack O'Brien  
   November 30, 2020

Hospitals experienced the eighth consecutive month of shrinking volumes, according to Kaufman Hall.

Even with federal aid, the operating margin for hospitals fell 8.5% year-over-year in October, according to the latest Kaufman Hall Flash Report released Monday morning.

Provider organizations experienced the eighth consecutive month of shrinking volumes, according to the study. For the month, adjusted discharges were down 9.3% compared to October 2019.

A rise in COVID-19 infections did contribute to a rise in some key metrics, including emergency department (ED) visits, which rose 1.9% compared to September.

Related: Hospital Operating Margins Rose 8.1% in September

Year-to-date, adjusted discharges were down 11%, operating room minutes declined 12%, and ED visits slid 16%.

These clinical and operational challenges have created a sizable financial impact, as both gross inpatient and outpatient revenues are down 2% and 7% over the same period, respectively.

"The next few months will be a grave period for our country, and for our nation's hospitals and health systems," Jim Blake, a managing director at Kaufman Hall, said in a statement. "If unchecked, the virus is projected to continue its rapid spread through communities as families gather for the holidays, and as colder weather pushes more activities indoors. The potential public health implications and financial impacts for our hospitals could be dire."

Related: Fitch: Healthcare Has Stable Outlook for 2021

Expenses represent another area of concern for health systems, both in relation to supply challenges and workforce issues.

Related: Nearly Half of Healthcare CFOs Expect 2020 Revenues to Grow by 3% YOY                     

The total expense per adjusted discharge rose 12.2% year-over-year last month, while the labor expense and non-labor expense per adjusted discharge rose 15.2%. The report indicated that these increase expenses will place hospitals in a "tenuous situation" if volumes do not recover.

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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