Dive Brief:
- Seventy-five percent of hospitals included in a national cohort study reported net positive operating incomes during the first two years of the COVID-19 pandemic, with COVID relief funds contributing to hospitals’ net operating margins reaching all-time highs, according to a study published in JAMA last week.
- Although many hospitals received relief funds, only 16% of facilities experienced financial distress during the pandemic, meaning that the funds “may not have been necessary” for for-profit hospitals and affiliated health systems, according to the study.
- Pandemic relief funds helped some facilities avert financial distress, including government-owned hospitals, teaching hospitals, Medicare and Medicaid disproportionate share hospitals and those serving larger proportions of Black populations. However, the COVID relief funds also led 12% of hospitals to “dramatically improve their financial performance” between 2020 and 2021.
Dive Insight:
Since the onset of the pandemic, hospital lobbyists and analysts have advocated for additional monetary relief and policy solutions to help hospitals stay afloat as the coronavirus pandemic triggered heightened supply and labor costs and temporarily put money-making elective surgeries on hold.
Analysts first declared the CARES Act insufficient to cover hospital revenue losses in 2020. Two years later, an analysis by Kaufman Hall reported that hospitals were likely to lose lose billions of dollars due to continued depressed margins and heightened labor costs.
However, the recent JAMA report paints a different picture of hospitals’ financial performance during the pandemic.
Researchers found that, while 6.4% of hospitals did report lower net operating incomes between 2020 and 2021, almost 18% of hospitals moved from negative to positive operating margins. Additionally, only 16.3% of hospitals experienced a new financial distress event after receiving relief funds.
The study found that 53.7% of hospitals surveyed would not have experienced financial distress even without COVID relief funds. Despite this, 76.5% of those hospitals still received COVID funding.
Most hospitals studied improved their financial performance over the study’s duration. The median within-hospital change in net operating income was $1.9 million, with a median weighted operating margin of 6.5% — a margin that outstrips the former, pre-COVID all-time high average operating margin of 6.4%.
The results suggest that COVID-19 funds “allowed some hospitals to achieve top financial performance, rather than address financial solvency.”
This findings are particularly problematic, the report argues, because the funds could have been allocated to systems that were struggling — including those that serve historically underserved populations.
“COVID-19 relief funds went to some hospitals that did not need financial support or the amount of funding allocated,” study concludes. “It will be important to consider alternative ways of allocating scarce public dollars to support our nation’s health system in crisis.”
Though this study is limited to 2021, organizations continue to lobby for hospital relief funds. The AHA in April released a report claiming hospitals are struggling to operate amidst “extraordinary financial pressures.” In May, Kaufman Hall reported that hospitals reported three straight months of positive operating revenues.
