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The Keckley Report

The Anomaly (or Not) of Eroding Hospital Finances through the Pandemic

By March 29, 2021March 1st, 2023No Comments

Last week, three reports about hospital finances during the pandemic were released:

Kaufman Hall: According to its March 2021 Hospital Flash Report:

  • In February, the median operating margin for hospitals was -0.5%–down 3% for the last 12 months, not including federal aid from the Provider Relief Fund (PRF). Including PRF, the median operating margin was +0.4%.

  • Overall revenue, not including PRF, fell 4.6% in February compared to the same month in 2020. Inpatient revenue dropped 4.4%, and outpatient revenue declined 5.5% year over year.

  • In February, adjusted discharges fell 13.8%, adjusted patient days decreased 8.3%, and emergency department visits dipped 26.8%, when compared to February 2020 levels.

  • Expenses also remained above the prior-year levels in February: total expense per adjusted discharge increased 19.6%, and drug expenses per adjusted discharge was up 29.1%.

Moody’s: Moody’s Investors Service based its analysis on hospital data from June thru September 2020:

  • Not-for-profit hospitals recorded a median operating margin of 0.5% and operating cash flow margin of 6.7% in fiscal 2020– down 2.4% and 8.4% respectively year over year.

  • Medicare advanced payments, deferral of payroll taxes, suspension of retirement contributions and deferral of capital spending led to substantially higher median days cash on hand, which rose from 44 days to 246.9 days.

  • Revenue from Medicaid and commercial payers remained the same while self-pay patient revenue increased from 5.1% to 5.5%. Patients were also sicker, which generated higher reimbursement rates.

  • Expense growth outpaced revenue gains despite staffing reductions and other cost-cutting efforts. Median operating expenses grew 4.7% in fiscal 2020 compared to 3% revenue growth. Expense growth was down from 5.7% in 2019.

HHS Office of the Inspector General: The OIG conducted a survey of 320 hospitals February 22–26, 2021 releasing its findings last week. Hospitals have operated in “survival mode” for an extended period of time exacerbating longstanding challenges in health care delivery, access, and health outcomes. The top 5 include:

  • Difficulty balancing the complex and resource-intensive care needed for COVID-19 patients with efforts to resume routine hospital care.

  • Staffing shortages have affected patient care, and that exhaustion and trauma have taken a toll on staff’s mental health.

  • Logistical challenges associated with vaccine distribution efforts and concerns about vaccine hesitancy among staff and members of their communities.

  • Exacerbation of existing disparities in access to care and health outcomes.

  • Financial instability due to increased expenses associated with responding to a pandemic and lower revenues from decreased use of other hospital services—especially for rural hospitals.

Taken together, one might conclude that hospitals have weathered the storm relatively well by managing costs as volume fluctuated during the pandemic. It might also be deduced that 2021 will be a transitional year and 2022 a return to normalcy. While understandable, it’s an incomplete assessment.

The pandemic has made matters considerably more complicated for hospitals than ever before. There are three reasons:

  • The scope of hospital operations now includes employment of 40% of America’s practicing physicians: the pandemic hurt the incomes of primary care and surgeons, and exacerbated shortages in behavioral health and advanced practice nurses. Thus, operating funds and capital allocations are spread thinner.

  • Employer activism about rising hospital costs, consumer frustration about hospital prices and surprise medical bills and regulator concern that hospital consolidation has protected hospitals from competition are peaking.

  • Capital from private investors in alternatives to hospital care is readily available. Of the 306 Special Purpose Acquisition Companies (SPACs), 53 are targeting healthcare niches where traditional services fall short in consumer experience, affordability and access.


The Senate’s 90-2 vote Thursday to continue the moratorium on the 2% Medicare payment sequester through the end of 2021 is encouraging. That bill next goes to the House, which is expected to pass it following the Easter recess. But dodging the sequester bullet saving $18 billion from cuts and averting the 4% PAYGO cuts triggered by passage of the American Rescue plan is not a long-term solution for hospitals.

What’s needed is a national discussion about the role, scope, funding and regulatory framework for hospitals that’s realistic and far-sighted.

There’s no debate that America’s 6000 hospitals play important roles in community health and economic development. There’s no debate that hospital finances are complex, and funding is screwed up and non-sustainable. And there’s no disagreement that some have fared better than others: locations in growing markets, favorable reimbursement by employers and insurers, program offerings that are profitable and lack of competition help. But their long-term future remains unknown.

Before the next pandemic, election or sensational story about an eye-popping hospital bill, that deliberation should begin. The fact is that the familiar H isn’t what it was yesterday. It’s a relic from 1906 when the Association of Hospital Superintendents became the American Hospital Association to serve individual members.

Today, hospitals are big business. More than 300 sponsor health insurance plans, two of three are affiliated with multi-hospital systems and many are investing directly in for-profit ventures hoping to generate “non-operating income”.

What this means tomorrow needs urgent attention that looks beyond near-term advocacy pursuits that protect the status quo to a long-term view of the health and wellbeing of the population and how that’s optimized cost-effectively.

It’s clear that hospitals aren’t what they used to be. Let the discussion begin.


P.S. The two-hour CNN Special last night featuring the physicians who played roles in the Trump White House Covid-19 response was enlightening: political pressure ‘trumped’ science in tense moments and mixed messaging was problematic. All agreed future public health challenges should be managed by health professionals protected from politics. Worth watching.


Kaufman Hall’s National Hospital Flash Report March 2021

“Moody’s – Outlook for US for-profit hospitals changed to negative on coronavirus outbreak”; March 24, 2020; Moody’s

“Moody’s Not for-profit and public healthcare-US”; March 24, 2021; Moody’s

“Hospitals Reported That the COVID-19 Pandemic Has Significantly Strained HealthCare Delivery”; March 2021; OIG

2019 & 2020 Employer Health Benefits Survey; KFF

White C, Whaley C. “Prices paid to hospitals by private health plans are high relative to Medicare and vary widely: findings from an employer-led transparency initiative.”; 2019; RAND

National Health Expenditure data: Historical; CMS

Bruce Stuart “The Hospital Industry Is In A Financial Mess: We Have A Unique Opportunity To Fix It”; August 27, 2020; Health Affairs


JAMA Study: Among Privately Insured, In-Person Visits Down 18% during Pandemic, Telehealth Visits more Costly than In-Person

Researchers analyzed utilization records for 36,568,010 working-age, privately insured US individuals between March 2019 and June 2020. Findings:

  • Ambulatory contacts decreased by 18% and telehealth use increased from 0.3% of contacts in 2019 to 23.6% of all contacts in 2020.

  • When these virtual contacts were added, the overall COVID-19 era patient and practitioner visit rate was 18% lower than that in 2019 (1.34 vs 1.64 visits per person).

  • Persons living in areas with limited social resources were less likely to use telehealth (27.4% in advantaged neighborhoods vs 19.9% in least socially advantaged)

  • Per enrollee medical care costs decreased by 15% from $358.32 to $306.04 per person per month.

  • Persons with 1 or more telehealth visits in 2020 had considerably higher costs than persons having only in-person ambulatory contacts ($2214.10 vs $1337.78 for the COVID-19–related subgroup and $735.87 vs $456.41 for the non–COVID-19 subgroup).

Weiner et al “In-Person and Telehealth Ambulatory Contacts and Costs in a Large US Insured Cohort Before and During the COVID-19 Pandemic”; March 23, 2021; JAMA Network

Michigan Study: Telehealth Use by Surgeons Spiked During Pandemic

University of Michigan researchers analyzed data for surgical practices from pre-pandemic to September 2020.Highlights:

Among 4405 surgeons in the cohort, 58.8% performed telehealth in any patient care context including new patient visits and 26.8% used telehealth. Prior to March 2020, less than 1% of new patient visits were conducted through telehealth.

Chao et al “Use of Telehealth by Surgical Specialties During the COVID-19 Pandemic”; March 26, 2021; JAMA Network

Geisinger Study: Vaccine Hesitancy Among Healthcare Workers Remains High

Geisinger surveyed (16,292) employees of a health care system on the eve of its vaccine distribution to assess their intentions to be vaccinated.

  • When asked whether they would “decide to receive the COVID-19 vaccine when one is available to [them],” 55.3% of respondents said yes, 16.3% said no, and 28.4% were undecided.

  • Patient-facing employees (58.2% of respondents) were more likely than employees who do not interact with patients to say yes (57.3% vs 51.4%).

  • Those who responded no or undecided reported concerns about unknown risks of the vaccines, 44.3% reported they wanted to wait until others’ vaccine experiences are known, and 21.1% reported they do not trust the rushed FDA process. More than one-half (57.4% cited concerns about known adverse effects, such as headache and fatigue.

Meyer et al “Trends in Health Care Worker Intentions to Receive a COVID-19 Vaccine and Reasons for Hesitancy”; March 23. 2021; JAMA Network

Study: 61% of Adults Experienced Undesired Weight Change During Pandemic

From the American Psychological Association Stress in America™ pandemic survey:

  • 18% of U.S. adults report undesired weight loss, with an average weight loss of 26 lbs. 42% of U.S. adults report undesired weight gain, with an average gain of 29 lbs.

  • 20% of men report undesired weight loss, with an average weight loss of 25 lbs. 39% of men report undesired weight gain, with an average gain of 37 lbs.

  • 17% of women report undesired weight loss, with an average weight loss of 27 lbs. 45% of women report undesired weight gain, with an average gain of 22 lbs.

  • The highest levels of undesired weight losses/gains were among Gen Z adults (18-24), Hispanics, parents and essential workers.

“Slightly More Than 6 in 10 U.S. Adults (61%) Report Undesired Weight Change Since Start of Pandemic”; American Psychological Association

Big Tech Coalition Driving Mobile App for Vaccine Verification

The Vaccination Credential Initiative standards will incorporate digitally verified clinical data with a name and birth date that can be also displayed as machine-readable QR codes. The coalition, led by Microsoft, Oracle and Salesforce is using open-sourcing architecture so they can be uniformly integrated into mobile apps that can be used to verify they have been vaccinated to gain admission to offices, restaurants, bars, entertainment venues and other public places.

“Big Tech Helps Set Standards for Covid-19 Vaccine Verification”; March 19,2021; Wall Street Journal


Morning Consult Poll: Majority Favor Medicare for All but Partisan Divide Looms Large

According to the latest Morning Consult/Politico survey conducted March 19-22:

  • Medicare for All: 55% of voters say they support Medicare for All “where Americans would get their insurance from the government” vs. 32% opposed– unchanged since the onset of the COVID-19 pandemic in March 2020. Partisan breakdown: 79% of Democrats favor vs. 8% oppose; 28 % of Republicans favor vs. 62% oppose.

  • Public option: 68% of voters favor “where people can choose from a government run program or a private option” vs. 18% oppose:Partisan breakdown: 80% of Democrats favor vs. 7% oppose; 56% of Republicans favor vs. 32% oppose.

“About 7 in 10 Voters Favor a Public Health Insurance Option. Medicare for All Remains Polarizing”; March 24, 2021; Morning Consult

‘Bill of the Month’ Launched by KHN-NPR

National Public Radio and Kaiser Health News are collaborating on a monthly report on surprise bills: This crowdsourced investigation by Kaiser Health News and NPR dissects and explains your medical bills every month in order to shed light on U.S. health care prices and to help patients learn how to be more active in managing costs. Recent posts:

  • “Her Doctor’s Office Moved One Floor Up. Her Bill Was 10 Times Higher” March 26, 2021

  • “College Tuition Sparked a Mental Health Crisis. Then the Hefty Hospital Bill Arrived” February 26, 2021

“Her Doctor’s Office Moved One Floor Up. Her Bill was 10 times Higher”; March 26, 2021; Kaiser Health News

Unmet Need: 5 Million Seniors Lack In-Home Support

Highlights of this study of 2614 adults 65 years or older:

  • 42% of individuals who expressed or demonstrated diminished capability to bathe, or toilet independently lacked grab bars or seats to help. This percentage represents 5 million individuals in the US with unmet need for equipment.

  • Unmet need was associated with younger age (49% if aged 65-74 years, 37% if aged 75-84 years, and 29% if aged ≥85 years), having fewer health conditions (55% if none vs 39% if ≥3), non-White race/ethnicity (40% if White vs 51% if Black, 54% if Hispanic, and 55% if other), no recent hospitalization (46% vs 37% if hospitalized), and no prior knee and/or hip fracture or surgery (46% vs 35% if prior fracture or surgery).

Lam et al “Unmet Need for Equipment to Help with Bathing and Toileting Among Older US Adults”; March 22, 2021; JAMA Network

Study: Public Health Spending Flat for 10 Years

Researchers analyzed public health expenditures in 8 areas for 49 states (California does not report its data to the Census Bureau) for the period from 2008 to 2018. Highlights:

  • Federal, state, and local governments spend $93 billion annually on public health in the US, but most of this spending is at the state level. (2.5% of total spending).

  • In 2008 mean and median per capita population-weighted state government spending for public health was $80.40 and $62.37, respectively. By 2018 those figures had decreased to $75.83 and $54.28. In the eleven years of state governmental spending reviewed across all forty-nine states in the analysis, there was no significant growth in states’ average per capita spending on public health after accounting for inflation.

  • Flat or downward trends were observed for overall (total) state spending and for spending in each of the categories of public health activities, except for a statistically significant increase in spending for injury prevention from $0.24 to $1.89 per capita.

  • Two categories saw statistically significant spending decreases during this period, including maternal, child, and family health and environmental public health.

Alfonso et al “US Public Health Neglected: Flat Or Declining Spending Left States Ill Equipped To Respond To COVID-19”; March 25, 2021; Health Affairs

Fed Affirms Holding Inflation to 2% while Debt Increases

Last week, Federal Reserve Chairman Jerome Powell said that the federal government can manage its debt at current levels. Deficits are expected to push the federal debt to 102.3% of gross domestic product by the end of the current fiscal year (September,2021), up from 79.2% at the end of 2019, Office. The CBO forecasts the debt will grow to 107% of GDP by 2031. Powell reiterated that the Fed is strongly committed to achieving inflation that averages 2% over time, a level that it has fallen short of over the past decade.

“Powell Says Now Is Not the Time to Focus on Reducing Federal Debt”; March 25, 2021; Wall Street Journal

Commerce Report: February Spending Down, but Considered a Temporary Dip

Per the Department of Commerce report released Friday:

  • Consumer spending fell 1% in February due to cold weather and snowstorms that struck much of the country, shutting businesses and keeping families indoors.

  • Household income fell by 7.1%, though that drop, too, was temporary. The federal government’s distribution of checks to most households as part of a $900 billion coronavirus-relief package had caused household income to rise by 10.1% the prior month, which also contributed to the jump in spending.

  • The price index for personal-consumption expenditures, the Federal Reserve’s preferred inflation gauge, rose 1.6% last month from a year before–slightly faster than the 1.4% annual rise in January, and the largest year-over-year increase since February 2020.

“Spending fell 1% and income dropped 7.1%; more stimulus checks, rising vaccinations are expected to unleash a burst in shopping and travel”; March 27, 2021; Wall Street Journal