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Financial health: COVID-19’s dramatic impact on hospital and health systems

An analysis prepared by Kaufman, Hall & Associates, LLC and released by the American Hospital Association this week highlights the dire impact of COVID-19 on the financial health of hospitals and health systems. The analysis suggests that without further government support, margins could sink to -7% in the second half of 2020, with half of all hospitals operating in the red. Impact to Arizona hospitals for the month of May is available in the monthly AzHHA Hospital Financial Report.


Other highlights from the Kaufman, Hall & Associates analysis include:

  • Without CARES Act funding, hospital margins would have been -15% in the second quarter of 2020. However, even with these funds, hospital margins are still expected to drop to -3% in the second quarter of 2020. Before COVID-19, the median hospital margin was a modest 3.5%.
  • In the most optimistic scenario, which assumes a slow and steady decrease in COVID-19 cases, median margins could be -1% by the fourth quarter of 2020.
  • Under another scenario that assumes periodic COVID-19 surges similar to the current case increases, margins could sink to -11%.

The COVID-19 pandemic has had an unprecedented impact on hospitals and health systems causing a serious threat to the future viability of many hospitals. Positive operating margins allow hospitals and health systems to invest in new facilities, treatments and technologies to better care for patients and communities. It also helps ensure they can attract and retain frontline caregivers and other critical staff and purchase personal protective equipment, drugs and other necessary supplies and equipment.