A positive operating margin—that is, more revenue than expenses—is critical for any organization to survive over the long term, including not-for-profit organizations. For America’s hospitals, positive margins create the ability to invest in new facilities, treatments, and technologies to better care for patients, and to build reserves to be ready for a future made highly uncertain due to the effects of the COVID-19 pandemic.

A February 2021 Kaufman Hall report found that 2021 hospital revenue would likely be down between $53-$122 billion due to the lingering effects of COVID-19. In this report, we examine the potential effect of COVID-19 on hospital operating margins over the course of 2021 in two scenarios – one more optimistic, and one more pessimistic. The scenarios take into account the degree and pace of the recovery of hospital volumes; COVID-19 vaccine progress; and the decline in COVID-19 cases. Key findings include:

  • By the end of 2021, hospital margins could be 10% to 80% below pre-pandemic levels
  • By the end of 2021, half of hospitals could have negative margins—far greater than pre-pandemic levels
  • During 2021, rural hospitals could see no improvement in margin

This report was prepared at the request of the American Hospital Association.

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