Half of hospitals may operate in red for second half of 2020, study suggests

July 22, 2020

A new analysis prepared by Kaufman, Hall & Associates and released by the American Hospital Association (AHA) highlights the dire impact of the COVID-19 crisis on the financial health of hospitals and health system, according to a press release.

Without further government support, the median margin at hospitals could sink to -7 percent in the second half of 2020, according to the analysis, with half of all hospitals operating in the red. In the most optimistic scenario forecasted by Kaufman, Hall, which assumes a slow and steady decrease in COVID-19 cases, median margins could be -1 percent by the fourth quarter of 2020. Under another scenario that assumes periodic COVID-19 surges similar to the current case increases, margins could sink to -11 percent.

Funding from the Coronavirus Aid, Relief, and Economic Security Act (CARES) staved off a large loss—or a median margin of -15 percent—in the second quarter of 2020. However, the median margin at hospitals is still expected to be -3 percent for that quarter. Before COVID-19, the median hospital margin was 3.5 percent.

Previous reports from the AHA have also shown the strain the virus is placing on hospitals and health systems. A report from last month estimates a minimum of $120.5 billion in financial losses, due in large part to lower patient volumes, from July 2020 through December 2020, or an average of $20.1 billion in losses per month. These estimates are in addition to the $202.6 billion in losses the AHA estimated between March 2020 and June 2020 in a report released in May. This brings the total estimated losses for the nation’s hospitals and health systems to at least $323.1 billion in 2020.

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