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AHA Report: Hospital Expenses Up 11%, Operating Margins Down 3.8% During Pandemic

The American Hospital Association (AHA) this week released a report detailing the impact of the COVID-19 pandemic on hospitals, including increases in hospital expenses, patient acuity and average length of stay, and decreases in operating margins.

Among other data, highlights of the report include:

• Hospital employment is down approximately 100,000 nationwide from pre-pandemic levels according to Bureau of Labor Statistics data. At the same time, labor expenses per patient increased 19.1% through 2021 compared to 2019 levels.
• Median hospital drug expenses by the end of 2021 were 28.2% higher than pre-pandemic levels through the end of 2019 and 36.9% higher per patient.
• Overall, supply expenses for hospitals were 15.9% higher by the end of 2021 compared to the end of 2019 and 20.6% higher per patient.
• By the end of 2021, total hospital expenses were up 11% compared to pre-pandemic levels in 2019 and median hospital operating margins were down 3.8%.

Taken together, the pressures of the pandemic, combined with Medicare payment cuts, have significantly strained hospitals. In response, AHA is asking Congress to:

• Allocate additional dollars to the Provider Relief Fund (PRF) to address the tremendous financial strain caused by the delta and omicron variants. While more than half of COVID-19 hospitalizations nationwide have occurred since July 1, 2021, during these two most recent surges, hospitals have not received any government assistance for them through the PRF.
• Extend Medicare sequester relief until the end of the COVID-19 public health emergency or Dec. 31, 2022, whichever is later. Because Congress has not yet provided relief, a 1% cut in Medicare reimbursement went into effect April 1, and the full 2% sequester will resume July 1.
• Enact flexible repayment terms for Medicare accelerated and advance payments. These payments provided much-needed relief during the early days of the pandemic when nonessential services were suspended. With the ongoing challenges hospitals are experiencing due to recent pandemic surges, flexibility in repayment is greatly needed.

The Center for Health Affairs will be reaching out to the Northeast Ohio congressional delegation to share these messages, and AHA is encouraging hospitals to connect with their members of Congress to tell their stories about the impact of the pandemic on their facilities.