A cohort study today shows that 75% of US hospitals had a positive net operating income in 2020 and 2021, with many seeing operating margins reach all-time highs, suggesting COVID-19 relief funds may have been larger than what was necessary during the first years of the pandemic. The study is published in JAMA Health Forum.
Sixteen percent of hospitals included in the study, however, had new financial distress experienced during the pandemic, and hospitals serving primarily Hispanic populations were more likely to suffer financial distress even after receiving pandemic relief funds.
The COVID-19 pandemic brought several challenges to hospital operations. From increased need for negative-pressure rooms and personal protective equipment, to delayed and canceled elective surgeries, the possibility of losing money and operating in the negative was very real.
Most US hospitals received substantial COVID-19 funding relief from the federal government, including through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the authors said.
In the new study, the authors compared the 2020-2021 financial performance of 4,423 US hospitals relative to their own prepandemic performance to assess how COVID affected net operating income, defined as operating revenue minus operating expenses.
75% of hospitals had positive net operations
Among the 4,423 hospitals, 3,094 (70.1%) were short-term acute care hospitals, 1,223 (27.7%) were teaching hospitals, and 3,123 (70.6%) were members of a healthcare system.
Eighty percent received public health emergency funds, which represented a median 3.1% of the 2020-2021 operating expenses. Overall 3,337 (74.8%) of hospitals had positive net operations in 2020 and 2021.
“Of the 25.2% of hospitals that had a negative 2020/2021 weighted net operating income, the majority (74.6%; 832) had a negative net operating income before 2020,” the authors said.
Pandemic funds prevented financial distress for 2,047 hospitals (46.3%), but there were 2,376 (53.7%) hospitals that would not have experienced pandemic-related financial distress even in the absence COVID-19 relief funds, the authors noted.
“Of the 4,423 hospitals in the sample, 3,012 (68.1%) had an improvement in net operating income from pre-2020 to 2020/2021,” the authors found. “COVID-19 relief funds may have also helped a substantial proportion of hospitals improve their pre–COVID-19 financial performance.”
More strain for hospitals serving Hispanic patients
Among all hospitals, 720 (16.3%) had public health emergency (PHE) financial distress, whereas 2,047 (46.3%) had PHE financial distress after excluding COVID-19 relief funding from net operating income.
Without relief funding, for-profit hospitals, and health system-affiliated hospitals were not in financial distress, suggesting that the provision of COVID-19 funding to these hospitals may not have been necessary.
In adjusted analyses, the authors found that hospitals located in areas with more than 20% Hispanic populations were 29% more likely to experience pandemic financial distress (adjusted odds ratio [aOR], 1.29; 95% confidence interval [CI], 1.05 to 1.60).
Pandemic relief funds were most beneficial if the hospital in question was government-owned, a teaching hospital, or a hospital serving larger Black populations, the authors found.
“Conversely, we found without relief funding, for-profit hospitals, and health system-affiliated hospitals were not in financial distress, suggesting that the provision of COVID-19 funding to these hospitals may not have been necessary,” the authors wrote.