Navigating the Financial Aftermath: How COVID Cost One State's Hospitals $8.1B

Healthcare CFOs know the pandemic cost them big, but now there's a number attached for one state.

After years of tight margins made worse by the pandemic, many hospitals are beginning to feel a measure of relief. But how much financial strain did the pandemic really put on hospitals and health systems?

In Pennsylvania, it was $8.1 billion worth of strife.

You read that right. The total COVID-19 related expenses and lost revenue reported by Pennsylvania hospitals and health systems between January 2020 and December 2022 were $8.1 billion, according to the report by The Pennsylvania Health Care Cost Containment Council and The Hospital and Healthsystem Association of Pennsylvania.

While this report only spotlighted Pennsylvania, there are a few key insights that are applicable to CFOs nationwide.

So what was the true financial impact?

As mentioned, Pennsylvania hospitals and health systems reported a staggering $8.1 billion in total COVID-19-related expenses and lost revenue during the pandemic.

Although most hospitals and health systems remained financially stable due to COVID relief funds, those funds have since dried up while the same challenges still exist.

Of this sum, COVID-19 staffing costs emerged as the most significant expenditure, reaching $1.3 billion. According to the report, other costs included:

• Testing expenses: $374 million
• Supplies and equipment expenses: $679 million
• Construction expenses: $28 million
• Housing care expenses: $9 million
• Other expenses: $434 million
• Revenue loss: $5.3 billion

When it comes to the staffing costs, the amount highlights the immense financial strain incurred by hospitals in responding to the staffing demands posed by the pandemic. CFOs still need to scrutinize these figures to gain a nuanced understanding of where financial resources were concentrated and explore avenues for financial resilience moving forward.

In fact, we have already seen a trend of CFOs across the nation exiting contract labor strategies and moving staff in-house.

Speaking of workforce …

The report also shed light on how the pandemic has exacerbated workforce shortages in Pennsylvania's healthcare sector.

Hospitals reported an average statewide vacancy rate of over 30% for key clinical positions, such as registered nurses, nursing support staff, and medical assistants, by the end of 2022.

This intensification of workforce shortages continues to pose an ongoing challenge to hospitals, hindering their ability to provide comprehensive care and potentially impacting patient outcomes. And as we know, these staffing shortages have been the catalyst to the increasing number of workforce strikes.

As mentioned, CFOs must strategize to address staffing shortages, focusing on recruitment, retention, and workforce optimization.

But what about other states?

A previous study showed that COVID-19 care prompted higher operating expenses and rapidly escalating labor costs for CFOs nationwide. In fact, hospitals in the United States experienced a total loss of over $200 billion because of an estimated 45% decrease in operating revenue just between March and June of 2020.

Pennsylvania's data through 2022 gives healthcare CFOs across the nation a granular look into these costs, providing valuable insights into the continued long-term financial repercussions of the pandemic.

The report's focus on COVID-19-related expenses and lost revenue underscores the continued need for robust financial planning and risk management, especially as many CFOs are still clawing their way out of the red.

CFOs should conduct thorough audits of their institutions' pandemic-related financial data, identifying areas for potential cost containment and revenue enhancement. Leveraging data can not only assist CFOs in forecasting future financial scenarios and implementing proactive measures, but help them push their current margins in the right direction.