CA's Safety Nets Lost $3.2B in First 18 Months of Pandemic

'When compared with non–safety net hospitals, safety-net hospitals were confronted with more concentrated financial losses,' report says.

California's 348 hospitals booked "highly variable” financials during the first 18 months of the COVID-19 pandemic, with many maintaining positive margins despite a virtual shutdown of profitable elective surgeries and procedures.

However, the state's safety net hospitals (SNH) did not fare well and lost more than $3.2 billion between January 2020 and June 2021, a new study in JAMA Health Forum shows.

"When compared with non–safety net hospitals, safety-net hospitals were confronted with more concentrated financial losses,” the report says.

For all hospitals, the operating margin decreased from 2.8% in 2019 to 0.4% in 2020 then rebounded to 1.3% in the first 6 months of 2021. However, safety net hospital margins did not recover in 2021 and were negative in 2020 and 2021. A similar pattern was found for total margin.

"For non-SNHs, operating margin was negative only in the first and second quarters of 2020 and quickly returned to positive levels comparable to pre–COVID-19 quarters,” the report says. "In comparison, operating margin for SNHs decreased substantially from the first quarter of 2020 to the second quarter of 2020 and remained lower than pre–COVID-19 quarters for the sample periods.”

Using state-compiled Hospital Quarterly Financial and Utilization Data, researchers from Cal State Fullerton and UNC-Wilmington focused on operating income and net income and found that non-SNHs saw reduced profits at the onset of the pandemic but were able to "mitigate more detrimental fiscal consequences” thanks largely to federal COVID-19 relief funding and strong equities market investments. 

The early months of the pandemic saw a virtual lock-down in care delivery nationwide as hospitals cancelled or postponed elective surgeries and other acute and non-emergency care, which generally account for nearly two-thirds of revenues.   

Increased admissions for COVID patients might have partially offset lost revenue from other procedures, but the American Hospital Association estimated a total loss of $202.6 billion by U.S. hospitals between March and June 2020.

To soften the blow, the federal Provider Relief Fund in April 2020 advanced hospitals serving Medicare 2% of their previous year's patient revenue and targeted $10 billion for safety-net hospitals and providers serving a high proportion of Medicaid patients.

The Feds also provided a 20% increase in Medicare payments for patients with COVID-19, loans through the Medicare Accelerated and Advance Payment Programs and the Paycheck Protection Program, state-funded increases in Medicaid payments in many states, and reimbursements to health care organizations for testing, treatment, and vaccination of uninsured patients.