Even the country’s largest health systems are not immune to the financial instability brought on by the Covid-19 pandemic, according to a new report.
The 25 largest nonprofit health systems saw their net patient revenue drop 21% from the fourth quarter of 2019 to the second quarter of 2021. Net patient revenue fell 3% year-over-year from 2019 to 2020. The infusion of relief funds from the Coronavirus Aid, Relief, and Economic Security Act helped patient revenue somewhat recover at the end of last year.
Released by advisory firm Alvarez & Marsal’s Healthcare Industry Group, the report includes data from the 25 largest nonprofit health systems in the country, that is, the health systems with the greatest number of hospitals. The report’s authors analyzed the most common metrics found across publicly available financial statements for more than 1,000 hospitals, roughly a third of all nonprofit hospitals in the country.
As net patient revenue declined, operating expenses steadily increased. Annual total operating expenses jumped 5% from calendar year 2019 to 2020. Aside from three health systems, the organizations experienced an increase in operating expenses ranging from 2% to 10%, regardless of size.
Operating income was down 11% from 2019 to 2020 — likely due to the predominantly negative margins in the first and second quarters of last year.
This data includes relief funds received through the CARES Act. The 25 health systems analyzed in this report got an estimated $6 billion to $8 billion in federal help.
The health systems’ poor financial performance is the result of steep declines in operational metrics across the board.
Discharges decreased 18% from Q4 of 2019 to Q2 of this year. In the same time period, surgeries fell 36% and emergency room visits declined 31%. Meanwhile, the average length of stay increased by 7%.
From 2019 to 2020, discharges dropped by 9%, while the length of stay jumped by 6%, which indicates that patients admitted to the hospital in this period had more complex conditions or were more severely ill.
“What will be more telling, as health systems continue to recover, is the impact from declined surgical and emergent volumes, which are down 11% and 17%, year over year, and in particular, what actions we see on the part of health system executive teams to either ‘bring back’ or offset these deflated volumes,” said John McLean, managing director of Alvarez & Marsal’s Healthcare Industry Group and co-author of the report, in a news release.
Photo: Jaiz Anuar, Getty Images