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March 26, 2021

Health Law Weekly

New Analysis Projects Hospital Margins Will Remain Below Pre-Pandemic Levels Through 2021

  • March 26, 2021

Hospital operating margins will remain depressed throughout 2021 because of the COVID-19 pandemic even under the most optimistic scenario, according to a new analysis requested by the American Hospital Association (AHA).

The analysis, prepared by Kaufman Hall & Associates, LLC, estimated that hospital margins could be 10% to 80% below pre-pandemic levels depending on how quickly patient volumes return, vaccine progress, and the extent COVID-19 cases decline or surge.

Before the pandemic, about 25% of hospitals had negative margins where expenses exceeded revenue; at the beginning of 2021 almost half of hospitals did, the analysis said. Even under the most optimistic scenario, an average of 39% of hospitals could have negative margins at the end of 2021, significantly higher than pre-pandemic levels, the analysis found. Rural hospitals are particularly at risk, the analysis noted.

“Both optimistic and pessimistic scenarios suggest that hospitals’ financial status will remain below pre-pandemic levels for the duration of 2021. Throughout the entire year, median operating margins will be lower, the percentage of hospitals with negative margins will be higher, and the margins for rural hospitals will be lower compared with already-challenging pre-pandemic levels,” the analysis concluded.

In February, Kaufman Hall issued another analysis projecting hospitals could see total revenue losses between $53 billion and $122 billion this year as a result of the COVID-19 pandemic.