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The 2021 financial prognosis for hospitals: Critical condition

A March 24 Becker’s Hospital Review story lays out the bad news that many hospitals may need life support this year.

If you look at the ledgers of the country’s largest health insurance companies, you could be forgiven for assuming that the COVID-19 pandemic has actually been a boon to the healthcare industry as a whole. After all, they’ve logged record profits over the course of a year. However, that is a stark contrast to the effect the pandemic had on hospitals and providers.

But a report from healthcare consulting firm Kaufman Hall projects pretty grim balance sheets for most hospitals in 2021. “Both optimistic and pessimistic scenarios suggest that hospitals’ financial status will remain below pre-pandemic levels for the duration of 2021,” the report states.

What’s the good news? Well, to hear the report tell it, there isn’t much. The study built out scenarios based on data from 900 hospitals, with it review spanning from before the pandemic through to current financial performance. The most optimistic scenario has 39 percent of hospitals showing negative operating margins this year. The pessimistic scenario pushes that number closer to 50 percent. Oooooof!

This is a daunting diagnosis, to say the least. As we’ve shared before, many hospitals—especially rural ones —were facing dire financial straits and closing their doors before the pandemic. And now, even as things begin to stabilize, cash reserves from the pandemic remain severely depleted. When we take into account factors like claims denials, underpayments, and downcoding from insurers, it’s not hard to see why.

Unfortunately, the government stimulus funds provided to hospitals only go so far, contrary to public perception. As Time noted last year, “A huge chunk of those emergency funds likely won’t go to lifesaving care or equipment, but to underwriting the astronomical administrative costs of negotiating a complicated network of private insurance providers and other bureaucratic functions.”

Now, we’re not going to go so far as to suggest that health insurers share their pandemic profits and help sustain hospitals. But at the very least, a “thank you” card—rather than rate increases and burdensome administrative processes—would be appropriate.

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