Latest data shows continued uncertainty for U.S. hospitals, health systems and physician groups amid pandemic

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Latest data shows continued uncertainty for U.S. hospitals, health systems and physician groups amid pandemic

Press releases may be edited for formatting or style | April 26, 2021
The COVID-19 pandemic continues to drive uncertainty for the nation’s hospitals, health systems, and physician groups, as signs of progress are tempered by narrow margins, low patient volumes, and high costs, according to two new Kaufman Hall reports.

U.S. hospitals and health systems saw mixed performance in March, as national COVID-19 metrics plateaued early in the month before climbing steadily again with increased spread of COVID-19 variants, as shown in the latest issue of the National Hospital Flash Report. Hospital margins remained narrow. The median Kaufman Hall hospital Operating Margin Index was 1.4 percent, not including federal Coronavirus Aid, Relief, and Economic Security (CARES) Act funding. With the funding, it was 2.0 percent.

“We expect to see additional margin gains in the months ahead, especially in comparison to record-poor performance in the early months of the pandemic,” said Jim Blake a managing director at Kaufman Hall and publisher of the National Hospital Flash Report. “Over the course of 2021, however, we project hospital margins could be down as much as 80 percent and revenues down as much as $122 billion compared to pre-pandemic levels as hospitals continue to feel the dire repercussions of COVID-19.”

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Physician groups experienced volatility throughout 2020 as a result of the pandemic. Physician productivity, compensation, and revenues for the year all fell below 2019 results. Meanwhile, the average investment required to supplement physician revenues rose, according to year-end analyses featured in the new quarterly issue of Kaufman Hall’s Physician Flash Report.

"Healthcare leaders should take a balanced approach with regard to meeting patient demand as they look to grow their physician strategies moving forward," said Cynthia Peters Arnold, a senior vice president at Kaufman Hall. "This will require rethinking the investment needed to pay physicians, setting clear clinical quality and economic targets, and establishing a physician management system with accountability for both physicians and administrators."

Hospitals saw year-to-date margins increase in March, while volumes continued to decline. Revenues and expenses rose across most metrics compared to the first three months of 2020. Operating Margin increased 34.5 percent (2.5 percentage points) year-to-date, not including CARES funding. With the funding, Operating Margin increased 45.7 percent (3.2 percentage points) year-to-date. Year-over-year margin increases were particularly high, largely due to measuring March 2021 performance against the same period last year, when hospitals were hit with devastating losses from national shutdowns and halting of outpatient procedures during the first month of the pandemic. Operating Margin, for example, jumped 128.4 percent or 14.5 percentage points year-over-year in March, without CARES.

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