Latest Surge in COVID-19 Infections Strains Hospitals, Shows Signs of a Difficult Winter Ahead

CHICAGO, Dec. 21, 2020 /PRNewswire/ -- Rising infection rates and mounting COVID-related hospitalizations rocked U.S. hospitals and health systems in November, continuing months of volatility spurred by the pandemic. Hospital operating margins fell as expenses continued to rise above budget expectations and above 2019 levels, according to the December issue of Kaufman Hall's National Hospital Flash Report.

Revenues and volumes were down across most metrics, but inpatient volumes rose as hospitalizations of coronavirus patients more than doubled throughout the month. Colder weather is expected to exacerbate the situation this winter, as activities move increasingly indoors and people gather for the holidays, fueling further spread of the virus. Skyrocketing COVID-19 infections already are stretching hospitals' capacity, with some states opening field hospitals to accommodate surplus demand.

The median Kaufman Hall hospital Operating Margin Index was -1.1% year-to-date (YTD) in November, not including federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. That represents an 11.6% (1.1 percentage points) decline compared to November 2019. With the funding, the median Operating Margin was 2.5% YTD, down 8.3% (0.9 percentage point) year-over-year.

"U.S. hospitals and health systems will face untold challenges in the months ahead," said Jim Blake, a managing director at Kaufman Hall and publisher of the National Hospital Flash Report. "Even with millions of doses of COVID-19 vaccine now in distribution, the virus is expected to continue its rapid spread and further strain vital healthcare facilities that already face limited resources and serious capacity issues. Now is the time—we must support our nation's hospitals."

Rising COVID-19 caseloads drove November inpatient volumes above 2019 levels for the first time since the start of the pandemic, with Patient Days up 4.0% year-over-year. Discharges, however, fell 5.1% compared to November 2019, resulting in an 8.7% year-over-year increase in Average Length of Stay, indicating an uptick in higher acuity patients.

All other volume metrics were down for the month, as many people continued to avoid or delay healthcare services to prevent potential exposure to the virus. Emergency Department Visits remained the hardest hit, falling 15.5% YTD in November. Adjusted Discharges fell 11.1% YTD and Operating Room Minutes declined 12.2% YTD. Revenue metrics were mixed for the month, with Inpatient Revenue down just 0.6% YTD, and Outpatient Revenue down 6.0% YTD.

Expenses continued to climb, as hospitals incurred the high costs of caring for fewer but sicker patients. Total Expense per Adjusted Discharge remained well above 2019 levels, rising 14% YTD. Labor Expense per Adjusted Discharge rose 15.2% YTD, and Non-Labor Expense per Adjusted Discharge increased 14.2% YTD. Drug Expense per Adjusted Discharge jumped 16% YTD and Purchased Service Expense per Adjusted Discharge rose significantly at 20% YTD.

The November results signal the mounting pressures for hospitals and provide a troubling sign of things to come if COVID-19 cases continue to rise in the coming months, as predicted.

Kaufman Hall experts are available for comment; please contact Philip Anast at [email protected].

About Kaufman Hall

Kaufman Hall provides management consulting solutions to help society's foundational institutions realize sustained success amid changing market conditions. Since 1985, Kaufman Hall has been a trusted advisor to boards and executive management teams, helping them incorporate proven methods, rigorous analytics and industry-leading solutions into their strategic planning and financial management processes, with a focus on achieving their most challenging goals.

Kaufman Hall services use a rigorous, disciplined, and structured approach that is based on the principles of corporate finance. The breadth and integration of Kaufman Hall advisory services are unparalleled, encompassing strategy; financial and capital planning; cost transformation; treasury and capital markets management; and mergers, acquisitions, partnerships, and joint ventures.

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SOURCE Kaufman Hall