The past year was challenging for hospitals, with little likelihood of substantial improvements any time soon.
Many hospitals faced financial challenges in 2020 as they were compelled to focus almost exclusively on treating COVID-19 patients while having to defer all elective surgery for at least two months. Because hospitals largely rely on revenue from elective surgery to offset the costs of lower-paid services, being unable to schedule elective surgeries had significant financial consequences for many hospitals.
Meanwhile, delayed and deferred treatments began to compromise the health of patients with severe coronary disease and cancer. The full effect of the delayed treatment for these patients is not likely to be fully known or measurable until sometime in the future.
Some types of hospitals were especially hard-hit by the pandemic, with the intensity of the impact having been determined by the types of patients they tend to admit. Safety-net hospitals have probably been most hard hit, given their high proportions of indigent and socially vulnerable patients. It is no surprise that these hospitals would be most affected, because even before the pandemic, many were already reporting they were that financially pressed.
Beyond existing financial challenges these hospitals have faced since before 2020, the past year had a disproportionately adverse impact on them simply because they had a disproportionate share of COVID-19 admissions. This reality reflects the fact that the disease most easily spreads in poorer communities and communities housing large numbers of multigenerational family units — the communities primarily served by safety-net hospitals.
Adding to the financial stress
Noncompliance with COVID-19 safety protocols by many Americans will likely exacerbate the difficulties facing hospitals. In the first weeks of 2021, hospitals have been bracing for the surge of patients from heedless Christmas/New Year’s celebrations, after having just finished coping with a post-Thanksgiving rise in patients with COVID-19. Despite repeated warnings by public health officials regarding the dangers of families and friends gathering together for in-person events, airports reported the holidays saw the largest numbers of people traveling through airports since the start of the pandemic. Because many of these gatherings were held indoors, given the inclement weather in most parts of the country, the surge in COVID-19 cases was expected to be greater than it was in the summer and early fall when gatherings could be outside.
The increase in hospitalized patients is coming at a time when hospitals had for a long time already been reporting mounting financial stress. An HFMA survey of 309 hospitals and health systems in late 2008 found:
- 17% of the organizations reported a debt offering failure.
- 38% reported an increase in the cost of debt.
- 70% expected to reduce spending for medical technology.
- 72% expected to reduce new construction.
- 53% expected to reduce operating expenditures.
In November 2020, based on an analysis of 900 hospitals, Kaufman Hall reported that, even with federal relief, the mean operating margin for hospitals had declined almost 19% from January through October 2020.a
Moreover, as the nation approached the year’s end, coronavirus-related hospitalizations surpassed 60,000, with 17 states reporting record numbers, and the outlook was for this alarming rise in hospitalizations to continue into 2021..b
Outlook mixed for 2021
Despite these trends, a few promising developments are occurring. Mortality rates from COVID-19 have been dropping over time as older populations, the most vulnerable to death, are now representing a smaller share of COVID-19 admissions. At the end of March, the median age of admission was 46; by the end of August it was 38.c The result has been a reduced use of ventilators, reduced hospital stays for those admitted and reduced mortality rates.
Nonetheless, the advantages associated with admissions of younger COVID-19 cohorts, on average, appear to be offset by a late-year decline in the effectiveness of strategies that had been used with success for treating the large numbers of COVID-19 admissions. By mid-November, 11 states had more than 80% of all their hospital beds filled with patients with COVID-19 and 18 states had more than 80% of their ICU beds filled with such patients.d These experiences are especially problematic in rural areas, which tend to have fewer staffed ICU beds than rural areas — 11 per 100,000 versus a U.S average of 27 per 100,000.
In addition to declining operating margins, many hospitals are also reporting significant staffing shortages. In some cases, the shortages have resulted in the need to move patients. There also are widespread reports of health professionals being required to quarantine after testing positive for COVID-19.
A long and difficult road ahead
As 2021 begins, the challenges from COVID-19 are clearly getting worse before they get better. On Jan. 8, the number of patients with COVID-19 hospitalized on a given day nationwide reached 131,889, eclipsing the record set in the last week of 2020.e Rhode Island has had to open a field hospital, and Atlanta has reopened a field hospital. As COVID-19 cases climb in the start of 2021, the country is likely to see a continued rise in hospitalizations for the foreseeable future, because for most people it takes five to seven days after exposure to begin to show symptoms.
The availability and distribution of vaccines is the most hopeful development the nation has seen through this terrible pandemic. But it remains uncertain when the vaccination process will help turn the corner of COVID-19 and restore any approximation of normalcy.
a National Hospital Flash Report, Kaufman Hall, November 2020.
b Almasy, S., Maxouris, C., and Hanna, J., “Coronavirus hospitalizations in US reach an all-time high with more than 60,000,” CNN Health, Nov. 10, 2020.
c Horwitz, L.I., et al., “Trends in COVID-19 risk-adjusted mortality rates,” Journal of Hospital Medicine, Oct. 23, 2020.
d Berlin, G., et al, “Challenges emerge for the U.S. healthcare system as COVID-19 cases rise,” McKinsey & Company, Nov. 25, 2020.
e The COVID Tracking Project, “US currently hospitalized,” The Atlantic, Data accessed, Jan. 8, 2021.