Delta Variant-Related Surge Exacerbates Strain On Hospital Financial Recovery

Financial-Recovery-Hospitals
By:
Cross Country Healthcare
Posted:
September 03, 2021 06:12 AM (GMT-05:00)
Categories:
Updates

The height of the coronavirus (COVID-19) pandemic left little unchanged in its wake. However, for hospitals and the healthcare system, it brought significant challenges operationally, emotionally, and financially. Now, despite the availability of vaccinations and what seemed to be the start to an end of the pandemic, the delta variant has once again placed hospitals and other facilities in the center of the storm.

While ensuring the best possible care for the communities they serve is the top concern for healthcare providers and leadership, health executives are also mindful of the global pandemic's current and future financial struggles.

Financial Concerns.

As more than 100,000 COVID-19 patients were hospitalized for the first time since January 30, healthcare facilities experienced both patient volume declines and financial setbacks in July as COVID-19 cases spiked due to the delta variant.

Compared to pre-pandemic levels seen in 2019, hospitals saw lower margins and patient volumes. Despite revenues rising above 2019 levels, the gains were often offset by expense increases. According to a recent report, operating margin was down 7% in the first seven months of this year when compared to the first seven months of 2019.

In short, hospitals could lose between $53 billion and $122 billion due to the lingering effects of COVID-19, depending on the speed of vaccine distribution and complete recovery of patient volumes, according to a repot by Kaufman Hall commissioned by the American Hospital Association (AHA).

The report details several factors that will continue to depress hospital finances this year, stating, “Whether recovery from COVID-19 in 2021 is relatively rapid or relatively slow, America’s hospitals will face another year of struggle to regain their financial health while providing necessary care and services to a nation that is continuing to experience the effects of an unprecedented pandemic.” Executives must now consider what the financial picture for the industry looks like post-COVID-19 and where they can add new sources of revenue.

Workforce Implications.

Hospitals and health systems are concerned about having an adequate supply of health professionals to meet the needs of their patient population amid the prolonged pandemic. While some facilities have been disproportionately affected by the new surge in the delta variant of COVID-19, others have remained less impacted. As a result, demand for staffing varies widely in different parts of the country. Some regions are seeing tighter supply constraints than others, which has been exacerbated by the quarantine of so many healthcare professionals. All of these forces are creating additional pressures on wage expectations and the movement of talent.

The supply of healthcare talent is declining across the nation as many providers fall ill themselves, experience burnout and fatigue, leave their positions due to lack of PPE supplies, or a range of other factors. With many nursing education programs on hold because they are unable to provide students with clinical experience in the current climate, healthcare leaders fear workforce shortages could impact the industry for years to come.

Shortage of Experience.

One of the biggest concerns in the early stages of the pandemic was just how prepared were American hospitals and health systems to weather this and other types of disasters. In a 2017 article published in the Journal of Emergency Management, research findings showed that while 80% of hospitals had disaster plans in place, only 17.5% felt their disaster plans were “very sufficient” and did not require any revisions. While some large health systems have command centers already established to handle emergency management response at this level, many others do not have the capabilities, the resources, or the specific expertise.

This situation presents an opportunity to identify best practices in emergency management protocol, to shore up executive training and establish ongoing education and recruitment practices to keep their organization ready should another global health crisis occur.

Concerns for Rural Hospitals.

These challenges impact the entire healthcare sector, but rural hospitals are uniquely impacted. Prior to the pandemic, rural hospitals faced financial struggles and a dire shortage of healthcare providers. In fact, 67 percent of rural areas are considered Health Professional Shortage Areas, and the majority of areas continue to be the most underserved.

The financial impact of COVID-19 on rural hospitals is two-fold. First, rural health care systems in the U.S. have unique organizational, clinical, and financial vulnerabilities that make it more challenging to withstand surges in COVID-19 cases. These vulnerabilities affect care quality and delivery and further hinder financial stability. Second, spending for PPE and other medical supplies has increased. Considering their small size and the fact that they already had low occupancy rates and thin margins prior to COVID-19, this scenario of declining revenue combined with increased expenses has created financial challenges for rural hospitals.

Looking Ahead.

Despite many economic stimulus packages and bailouts for hospitals, there are still concerns about what the U.S. will look like after the pandemic. As healthcare organizations face the arduous but necessary reflection on their level of preparedness, successes and lessons learned while uncertainty remains a second wave, leaders will also need to look to the future to adjust practices, policies, and planning in a post-pandemic world.

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