California Hospitals Face $16.7 Billion in COVID-19 Related Losses
June 5, 2020 – California hospitals are facing a likely $16.7 billion net loss in revenues by April 2021 in the wake of the COVID-19 pandemic, a new data analysis prepared by Kaufman Hall shows.
California hospitals cancelled most elective and non-emergency services in March to prepare for a surge in COVID-19 patients, following the declaration of a State of Emergency by California Gov. Gavin Newsom. In April alone, hospitalizations declined 35% and emergency department visits plummeted 62%. In just March and April, California hospitals lost $6.3 billion.
“Since the outset of the pandemic, California hospitals have rightfully focused their efforts on caring for COVID-19 patients, protecting their workers, and preserving the safety of their communities,” said Ken Kaufman, Chair of Kaufman Hall. “Our research shows that these vital efforts have come at an extremely high cost. When coupled with an already challenging financial environment prior to COVID-19, California hospitals are now facing a very difficult path forward.”
The economic impact of COVID-19 is also expected to result in higher numbers of uninsured patients and Medi-Cal beneficiaries, putting additional pressure on revenues. Federal assistance covers only a portion of hospital shortfalls. Even with the assistance factored in, California hospitals are facing $11.2 billion in lost revenue by the end of 2020, the analysis finds.
“California hospitals took necessary actions to care for patients during a public health emergency and comply with a state order,” said Jody Hill-Mischel, managing director, Kaufman Hall. “But the impacts have been severe, especially considering that hospitals were already facing difficult economic headwinds.”
Before the COVID-19 pandemic began, 40% of California hospitals had negative margins. All three major national ratings agencies recently changed their outlook for the non-profit hospital sector to negative, further challenging the ability of hospitals to access needed capital.
The pandemic is expected to present unprecedented challenges to the ability of hospitals to serve their communities and remain financially viable for years to come. The crisis could lead to permanent declines in hospital volumes, forcing providers to consider workforce reductions and other significant changes to their cost structures.
“The financial burdens on California hospitals have already been significant, and they are likely to grow for the foreseeable future,” Hill-Mischel said. “Hospitals that already have been financially challenged may not be able to survive this crisis.”
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Amendola Communications (for Kaufman Hall)