Study details

For the study, researchers looked at the average operating margins for 4,223 hospital and found that of the hospitals analyzed, average margins increased from 2.8% before the pandemic to 6.5% from 2020 to 2021. In addition, operating margins hit an all-time high in 2020 and 2021, the researchers found.

Around 6.4% of hospitals studied saw significant financial losses during the pandemic, with a median decline in operating incomes of $8.9 million.

The researchers found that COVID-19 relief funds were especially important for government-run hospitals and safety-net facilities, helping prevent them from posting negative operating incomes. 

More than half of hospitals experienced no financial distress due to COVID-19, even without any relief funds, but more than 75% received relief funds anyways, according to the study.

"This resulted in moving many hospitals to peak historical operating margins (i.e. profitability), rather than simply restoring them to prepandemic operating margins," the researchers wrote.

Though lawmakers had to quickly react with emergency relief funds, "it will be important to consider alternative ways of allocating scarce public dollars to support our nation's health system in crisis," the researchers wrote.

Discussion

According to the American Hospital Association (AHA), almost half of hospitals in the United States still have negative operating margins.

Aaron Wesolowski, VP of policy research at AHA, said 2022 was "the worst year of the pandemic financially for hospitals and health systems, due to the rapid increase in expenses and the massive spike in COVID volume from the Omicron surge early that year."

Since the study doesn't include 2022 in its dataset, Wesolowski described the analysis as incomplete.

"Incomplete analyses like this are not reflective of the many immense struggles and challenges the hospital field has faced and continues to face, including a workforce shortage crisis, along with skyrocketing input costs for supplies, equipment, drugs and labor, and persistent inflation," he said.

In addition, Risha Gidwani, co-author of the study, noted that hospitals treating higher proportions of Hispanic individuals saw the greatest amount of pandemic-related financial distress. This echoes an Office of Inspector General report issued earlier this month that revealed hospitals with larger populations of Hispanic residents received fewer Provider Relief Funds in 2020.

That "suggests that hospitals treating certain underserved communities were not funneled funds to offset their outlays on COVID-19 care and/or preparation," Gidwani said. (Dreher, Axios, 7/20)

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