COVID-19 financially challenged hospitals in California, but federal and state government assistance programs went a long way toward cushioning the blow, according to a cross-sectional study in JAMA Health Forum.
Nonetheless, safety net hospitals, which provide care to individuals regardless of their ability to pay, were hit particularly hard, according to researchers with the University of North Carolina.
“Although hospitals experienced reduced profits between January 2020 and June 2021, the intervention of government assistance programs was able to mitigate more detrimental fiscal consequences,” the study concludes. “When compared with non-SNHs, SNHs had lower profits and received more government assistance.”
Hospitals struggled financially throughout the U.S.; the American Hospital Association estimates the total loss came to $202.6 billion between March and June 2020.
The study examines the financial performance of 348 hospitals in California. The data show that 101 safety net hospitals in the state saw operating losses of more than $3.2 billion during the time. When the pandemic really began to ramp up in March 2020, hospitals were forced to eliminate elective and outpatient procedures, which represent 63% of an average hospital’s revenue stream. That money was not replaced by the many COVID-19 patients that needed care, the study says. Government assistance programs helped keep hospitals afloat, even safety net hospitals.
In April 2020, the federal Provider Relief Fund (PRF) gave hospitals that serve Medicare patients 2% of what they made the previous year serving that population. In addition, the hospitals were given a 20% increase in financial assistance for treating patients with COVID-19. Loans were offered though the Medicare Accelerated and Advance Payment Programs and the Paycheck Protection Program. The state increased payments for the treatment of Medicaid beneficiaries as well along with payments for treating, testing and vaccinating uninsured patients.
In other words, California hospitals were given an unprecedented amount of financial aid that bolstered profit margins so revenue in 2020 did not dip dramatically compared to 2019. This was especially the case for rural, government and smaller hospitals.
“Similar to government, rural, and smaller hospitals, SNHs traditionally operated on thinner margins prior to the pandemic and might have been disproportionately disrupted by COVID-19 both financially and operationally,” the study states. “Consequently, the patient populations served by these SNHs were vulnerable to reduced access to health care services. To address this situation, the PRF contained a $10 billion targeted distribution for SNHs.”
To reach their conclusions, researchers examined the hospital quarterly financial and utilization data from the state of California Office of Statewide Health Planning and Development. The numbers were crunched from January 2019 to June 2021.
“Observing continuous dynamics of hospital financial performance is important to an understanding of how hospitals fared as cases rapidly surged then receded multiple times in 2020 and 2021,” the study states.
The operating margins were negative for non-safety net hospitals in the first and second quarters of 2020. “In comparison, operating margin for SNHs decreased substantially from the first quarter of 2020 to the second quarter of 2020 and remained lower than pre–COVID-19 quarters for the sample periods,” the study states.