It is ironic that during a pandemic hospitals would be very busy with treatment services, however, COVID 19 pandemic has created financial challenges for hospitals and healthcare systems.
Even with federal aid and support, half of hospitals in the US could be in the Red by the end of the year based on AHA analysis. in the second half of the year, they are expecting -7% margin.
Why is this the case? Well 5 main reasons that include:
- Historically, even before the pandemic, the median hospital margin was 3.5 percent.
- Hospitals and healthcare system depends on high margin procedures like surgery, ER, imaging, cardiology, orthopedics, as main source of profit which they use to subsidies other areas.
- Hospitals depend on volume of cases and on government and insurance payments. While healthcare insurance margin sky rocketed during the pandemic due to less utilization, hospitals had to remain open with less revenue.
- Elderly patients who use a majority of the care in hospitals were locked up during the pandemic and still afraid to be exposed, thus postponing any elective procedures like knee replacement.
- Telehealth usage went up, eliminating visits to the ER and eliminating some facility fees hospitals used to be able to charge for.
References: AHA and KaufmanHall Reports