Hospitals could lose between $53B and $122B this year due to pandemic

US capitol building
As talks on Capitol Hill heat up over a new COVID-19 relief package, the American Hospital Association released a new report that shows hospitals could lose up to $122 billion this year. (Getty Images)

Hospitals could lose between $53 billion and $122 billion due to the lingering effects of COVID-19, depending on the speed of vaccine distribution and complete recovery of patient volumes, according to a new report from Kaufman Hall.

The report, released Wednesday and commissioned by the American Hospital Association (AHA), details several factors that will continue to depress hospital finances this year. The report comes as the AHA is pressing Congress to include more money for the provider relief fund in its next package.

“Whether recovery from COVID-19 in 2021 is relatively rapid or relatively slow, America’s hospitals will face another year of struggle to regain their financial health while providing necessary care and services to a nation that is continuing to experience the effects of an unprecedented pandemic,” the report said.

Kaufman Hall explored two scenarios hospitals could face when it comes to revenue loss.

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Under an optimistic scenario, hospitals would lose $53 billion in revenue this year. The loss would primarily come from a $27 billion decline in outpatient revenue and $17 billion for inpatient as well as $9 billion in emergency department revenue.

Kaufman estimates that volumes return to pre-pandemic levels alongside revenue. It also relies on supply, distribution and administration of the COVID-19 vaccine as well as a sustained decline in cases.

Hospital outpatient revenues have been slammed by the pandemic as patients have been hesitant to go to the hospital for medical care.

Under a more pessimistic scenario, hospitals would lose $122 billion thanks to a $64 billion decline in outpatient revenue.

Hospitals could lose billions more if consumers and hospitals adapt to a “new normal” of slower or only partial recovery of patient volumes. Another concern is a cyclical rise and fall of COVID-19 surges as residents stop social distancing before herd immunity is reached, the report said.

While hospitals are still expected to see revenue declines in 2021, major increases in supplies and staff are expected to continue this year. Kaufman estimated that supply expenses such as purchasing personal protective equipment increased 13% in 2020 compared to 2019, and labor expenses increased by 14% despite “many hospitals furloughing portions of their workforce.”

Hospitals have faced substantially higher costs for travel nurses and other temporary staff to ensure they are fully staffed.

AHA's president and CEO Rick Pollack said the report underscores the need for more funding to be added to a $175 billion provider relief fund passed by Congress last year as part of the CARES Act. The AHA estimates roughly $4 billion is left to be allocated to providers.

“It is red alert time for the provider relief fund,” Pollack said in a call with reporters Wednesday. “If Congress doesn’t act soon, hospitals just aren’t going to have the tools and resources to serve patients during the pandemic.”

But it remains unclear whether Congress will add more funding.

The House of Representatives is expected to vote this week on a $1.9 billion COVID-19 relief bill with no additional funding for hospitals. The AHA is hoping to change that when the legislation reaches the Senate and is seeking a $35 billion boost to the relief fund.

“There is time as we go through this process to further amend the packages that are already in place,” Pollack said.

There is likely bipartisan support for more funding. Sen. Susan Collins, R-Maine, said during the confirmation hearing for President Joe Biden’s Department of Health and Human Services Secretary nominee Xavier Becerra that she was “astonished” there was not money for providers in the $1.9 trillion package.