Hospitals could lose $53B this year — and that’s in the best-case scenario

A new report from Kaufman Hall examines two potential financial situations for hospitals in 2021 — one optimistic, and the other bleak. Hospitals could lose between $53 billion and $122 billion depending on which scenario plays out.

Even in the most hopeful scenario, U.S. hospitals are expected to face a massive financial loss in 2021, according to a new report.

Prepared by Kaufman Hall and released by the American Hospital Association, the report uses historical revenue data to project two potential scenarios for hospitals in the coming year and how each would affect revenues.

The first is the optimistic scenario. This scenario assumes that there will be a consistent and complete recovery of patient volumes, the vaccine rollout will progress smoothly and there will be a sustained decline in Covid-19 cases.

In this situation, hospitals could lose $53 billion in revenue, driven by a $27 billion dip in outpatient revenue, according to the report.

The second scenario is a pessimistic one. This scenario assumes there will be a slow and partial recovery of volumes, delayed progress in the vaccine rollout and cyclical surges of Covid-19 cases.

In this circumstance, hospitals could lose $122 billion in revenue, with the biggest loss once again stemming from outpatient revenue.

“Covid-19 has changed healthcare, and its long-term impact will extend beyond the effects visible today,” said Matt Hawkins, CEO of revenue cycle management company Waystar, in an email. “The latest report from AHA and Kaufman Hall indicates that we’re not out of the woods yet. Patients delaying or outright canceling elective procedures have hit hospitals hard; even as restrictions lifted, our data found that many patients continued to hold off on rescheduling elective procedures in certain categories, like plastic surgery and orthopedic procedures.”

Not only did the pandemic put hospital revenues in jeopardy, but it also increased expenses, the report shows.

Expenses for drugs, labor, supplies and purchased services, like environmental services, saw sharp increases last year. Drug expenses led the pack, rising 17% in 2020 compared with the year prior. This was followed closely by purchased service expenses, which jumped by 16% in the same time period.

“When we talk about the historic financial challenges hospitals face, it’s about more than dollars and cents, it’s really about making sure hospitals and health systems have the resources needed to provide essential services for their patients and communities,” said Rick Pollack, president and CEO of the American Hospital Association, in a news release.

Hospitals need more financial support “to continue to provide access to care and to help get as many vaccine shots into arms quickly,” he said.

The association, along with eight other health organizations, sent a letter to Congress on Thursday urging them to provide additional funding for providers in the current reconciliation package.

Specifically, the association is hoping $35 billion will be added to the $1.9 trillion Covid-19 relief bill that is moving through Congress, Pollack said in a press call according to FierceHealthcare.

Congress allocated $178 billion last year through the Provider Relief Fund to help offset lost revenues and additional expenses, but “the bulk of this funding has either been distributed or allocated for payments to account for losses incurred into the first quarter of this year,” the letter states.

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