Negative operating margins likely for 39% of hospitals this year: Kaufman Hall

Even under an optimistic pandemic recovery scenario, 39 percent of hospitals may have negative operating margins this year, according to a new report from healthcare consulting firm Kaufman Hall. 

In a pessimistic scenario, nearly half of U.S. hospitals may have negative operating margins, according to the report. Prior to the pandemic, 25 percent of hospitals had a negative operating margin. 

The report, commissioned by the American Hospital Association, sought to understand COVID-19's effect on hospital operating margins. Kaufman Hall used data from 900 hospitals from before the pandemic, during the pandemic and most current performance. The report modeled both an optimistic and pessimistic scenario. A pessimistic scenario is one in which there is a partial recovery of volume, slow vaccine progress and cyclical COVID-19 surges. An optimistic scenario is one in which there is consistent recovery of patient volume, quick vaccine progress and a sustained decrease in COVID-19 cases.

Kaufman Hall's report also found that by the end of 2021, hospital margins could be 10 percent to 80 percent below levels before the pandemic, based on slow or fast recovery. 

"Both optimistic and pessimistic scenarios suggest that hospitals' financial status will remain below pre-pandemic levels for the duration of 2021," Kaufman Hall wrote. "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."

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