26 Sep Covid: Safety Net Hospitals Experienced Greater Financial Losses During Pandemic

MedicalResearch.com Interview with:

Allison Witman PhD
Assistant Professor of Economics
Economics & Finance
Cameron School of Business
University of North Carolina, Wilmington

Yu Wang PhD
Assistant Professor
Congdon School of Supply Chain, Business Analytics, & Information Systems
Cameron School of Business
University of North Carolina Wilmington

David Cho PhD
Assistant Professor of Management
California State University, Fullerton

MedicalResearch.com: What is the background for this study?

Response: The COVID-19 pandemic placed tremendous financial pressure on hospitals. Beginning in March of 2020, hospitals cancelled outpatient and elective procedures to accommodate surges in demand from COVID-19 patients. As these procedures account for more than 60% of an average hospital’s revenue, cancellation posed serious challenges to the financial health of hospitals. Revenue from COVID-19 patients may have partially offset these effects, but the American Hospital Association estimated a total loss of $202.6 billion by American hospitals between March and June 2020.

In response, the U.S. government created large federal assistance programs aimed to stabilize hospitals’ financial situation as their ability to maintain operations was critical to the health of the nation. Due to differences in hospital characteristics, certain hospitals such as rural hospitals and those serving a higher share of Medicaid and uninsured patients (e.g., safety net hospitals) may have been more financially susceptible to the effects of the pandemic. These hospitals that serve vulnerable patient populations historically have had lower profit margins and were candidates for targeted COVID relief funding (e.g., Safety Net Hospitals Payments, a $10 billion component of the Provider Relief Fund).

MedicalResearch.com: What are the main findings?

Response:  In this study, we track the financial performance of 348 hospitals in California for the first six quarters of the COVID-19 pandemic from January 2020 to June 2021. We studied average financial performance across all hospitals as well as by safety net status.

We find that across all hospitals, average net income was negative in the first quarter of 2020 but otherwise positive. Government assistance programs combined with the strong equity market performance that started in the second quarter of 2020 buffered what otherwise would have been worse financial outcomes for hospitals. Safety net hospitals that provide the most uncompensated care experienced more quarters of losses than non-safety net hospitals, despite receiving higher and more sustained levels of government assistance.

MedicalResearch.com: What should readers take away from your report?

Response: The main takeaways are that hospital profitability was quite volatile during the first six quarters of the pandemic and that the financial performance of hospitals varied greatly (e.g., safety net hospitals experienced more concentrated financial losses). Pandemic-related government assistance played an important role in profitability. It increased profits for already profitable hospitals and acted as a buffer against potentially larger losses among safety net hospitals.

MedicalResearch.com: What recommendations do you have for future research as a results of this study?

Response: One future research direction would be to track hospital financial performance through a longer time period after the pandemic, especially through 2022 as many COVID-related fundings are running out or have depleted for hospitals. Due to the limitation of our data, we were unable to directly measure the amount of assistance a hospital received. Therefore, another potential direction would be to use different data to directly link the amount of government assistance that a hospital received with its financial performance, operations, and patient outcomes (e.g., is there an association between the amount of government assistance received and changes in patient readmissions rate?)

Citation:

Wang Y, Witman AE, Cho DD, Watson ED. Financial Outcomes Associated With the COVID-19 Pandemic in California Hospitals. JAMA Health Forum. 2022;3(9):e223056. doi:10.1001/jamahealthforum.2022.3056

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Last Updated on September 26, 2022 by Marie Benz MD FAAD