Nonprofit hospitals slowly recuperating from the worst effects of COVID-19

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It's been a long pandemic for the U.S. healthcare system, but just as there are signs that the pandemic may be fading, so too is the situation improving for nonprofit hospitals in particular, which are slowly recuperating from the worst effects of COVID-19.

Alvarez & Marsal's Healthcare Industry Group recently published findings to that effect, examining data from Quarters 2 and 3 in 2021 and discovering that, after more than a year of decreasing surgery volumes and emergency room visits, the effects of the pandemic on nonprofit hospitals is beginning to flatten.

Operating income was helped greatly by federal Coronavirus Aid, Relief and Economic Security Act funding during that time, but was hampered by continuously increasing operating expenses and a lagging growth in net patient revenue; hospitals needed time to recover from the major COVID-19-related dip in volumes, revenue and income of Q2 2020.

The intervening years have seen some metrics improve, though some areas are still posing challenges. Net patient revenue was a bright spot in the data: It decreased 2.5% from 2019 to 2020 but bounced back to 13% above pre-pandemic levels in Q3 2021, the most recent quarter for which data was available.

Total operating expenses increased 5% from 2019 to 2020 and ended 14% above pre-pandemic levels in Q3 2021. Operating income decreased 14% from 2019 to 2020 and returned to pre-pandemic levels in 2021, with large infusions of CARES Act funds in between.

Discharges, patient days and length of stay have recovered more slowly, and are still underperforming compared to before the pandemic. Discharges dipped 9% from '19 to '20, and were still 4% below pre-pandemic levels in the most recent data. Patient days decreased 5% over that time, and were 5% above pre-pandemic levels in 2021. Length of stay increased 6% from '19 to '20 and was still more than half a day longer in Q3 2021 than before the public health emergency.

Surgeries have recovered, but only slightly, decreasing 12% during the pandemic and recuperating to only about 5% below the pre-pandemic baseline. Emergency room visits showed a similar trajectory, decreasing 18% from 2019 to 2020, and remaining 3% below pre-pandemic volumes in Q3 2021.

WHAT'S THE IMPACT

According to the report, one of the main factors influencing these trends was the spread of the Delta variant, the predominant strain of the coronavirus during Q3 2021. The Delta wave initially hit hard in the southern states where vaccination rates were significantly lower than in other parts of the U.S. 

In Q3 2021, at an annual rate, emergency visits and the number of patient days increased most in those southern states, while elective surgeries saw the greatest decline. This led to the highest rate of change in net patient revenue in hospitals in the South compared to other U.S. regions, even though operating expenses increased only moderately in that part of the country.

It's not clear what Q4 2021 or Q1 2022 data will reveal, but the Omicron surge and its associated care deferrals doesn't necessarily bode well for future results, said A&M. 

THE LARGER TREND

A Fitch Ratings report published during Q3 2021 suggested that waves of different variants, from Delta to Omicron, put pressure on nonprofit hospital margins.

That means additional staffing and supplies are needed to handle a new influx of COVID-19 patients. The greater number of patients is resulting in a self-induced postponement of non-emergent surgical cases, resulting in lower hospital revenues.

Additionally, hospitals and skilled nursing facilities are competing for a limited supply of nurses, including more expensive contract nursing staff.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com