Hospital margins could sink to a negative 7% this year: 5 things to know

The COVID-19 pandemic has created financial challenges for hospitals and health systems, and, without additional federal aid, half of US hospitals could be operating in the red in the second half of this year, according to an analysis released by the American Hospital Association on July 21. 

Five takeaways from the analysis: 

1. Before the COVID-19 pandemic, the median hospital margin was 3.5 percent. COVID-19 is expected to drive the median hospital margin from positive to negative. 

2. Without funding from the Coronavirus Aid, Relief and Economic Security Act, hospital margins would have been a negative 15 percent in the second quarter of 2020. Margins are still expected to drop to a negative 3 percent in the second quarter.

3. Without additional aid from the federal government, hospital margins could sink to a negative 7 percent in the second half of this year. 

4. In the second quarter of this year, nearly half of U.S. hospitals had negative margins. Those hospitals will remain with negative margins without further financial support.  

5. "Heading into the COVID-19 crisis, the financial health of many hospitals and health systems were challenged, with many operating in the red," said hospital association President and CEO Rick Pollack in a news release. "As today’s analysis shows, this pandemic is the greatest financial threat in history for hospitals and health systems and is a serious obstacle to keeping the doors open for many." 

The full report, prepared by Kaufman, Hall & Associates and released by the AHA, is available here

More articles on healthcare finance:
Texas, West Virginia hospitals set to close this month
HHS' site-neutral pay cuts are legal, appeals court rules
Florida health system brings back 640 furloughed workers

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