August 12, 2020

It is safe to say that the American healthcare industry has, in 2020, experienced its most challenging crisis in modern times. Many physician specialties, most hospitals and nearly all surgery centers experienced either suppressed case volume or a massive decline in earnings. This was especially true for the second quarter (Q2) of the year—the time when elective surgery shutdowns were in full swing. However, we are now hearing that the COVID crisis may not have been as devastating to hospitals’ bottom lines as many first believed.

An Astounding Statement

In its analysis of hospital financial standing during Q2 of 2020, HealthcareDive is reporting that “all of the nation’s largest for-profit hospital chains saw higher profits, and some more than tripled their net income compared to last year.” Now, at first glance, that might seem like a shocking, provocative, and even dumbfounding statement to the outside observer; so, it deserves a little bit of unpacking.

First, notice that while the above statement uses the word “all,” there are some limiting terms, as well: “largest,” “for-profit,” and “chains.” So, it’s possible that this reported financial bonanza in Q2 may not apply to a smaller hospital chain or a large independent hospital or a large non-profit hospital chain. Second, despite what we now see as its somewhat narrowed focus, the above statement is still extraordinary. That any hospital or hospital class could actually realize higher profits in Q2 of 2020 over against the same quarter in 2019—at the height of C-19—is nothing short of remarkable and begs the question, how could this be?

A Simple Explanation

It is well documented that the federal government enacted several measures to keep American citizens and American businesses afloat during the course of this current pandemic. Among those measures was the Coronavirus Aid, Relief, and Economic Security Act (CARES), which was specifically designed to help hospitals and healthcare providers—to the tune of $175 billion. That is not an insignificant amount of money. It’s true that many hospital administrators and CFOs did a masterful job at cutting costs and reorganizing resources during the public health emergency (PHE), but the infusion of federal funds appears to be the most significant driver of Q2 profits for many facilities.

By way of background, the original thinking on the part of federal officials was that delivering relief funds to hospitals would sustain them as case volumes plummeted and would help to stave off possible closures or bankruptcies. However, many believe that in their rush to get this money out to our front-line health responders, these officials failed to efficiently target the cash infusions. According to the HealthcareDive article, some feel these relief funds “tended to go to wealthier systems instead of those in a more fragile state and in need of financial resources, while others contend it was supposed to help systems stave off liquidity issues that would have forced them to close, reduce staff or services.”

However, it wasn’t just the big for-profit health systems that saw profits during the midst of the COVID calamity. Some of the non-profit hospital chains also saw financial increases in the second quarter of this year. For example, Kaiser Permanente reported that its net income for the second quarter more than doubled to $4.5 billion—more than all the for-profit chains combined.

The full report, examining the case trends and profit reports for some of the nation’s largest for-profit hospital systems can be found at the following link: https://www.healthcaredive.com/news/buoyed-by-bailout-funds-all-major-for-profit-hospital-chains-reported-incr/583091/.

A Final Thought

Regardless of the inefficiencies of federal action and the perceived inequities in relief fund distribution, our readers can take solace in the fact that a great many of our health facilities were able to come through the worst months of the pandemic in sound financial shape. This will be important in the months to come as the nation will continue to face an uncertain health outlook—making strong and financially viable hospitals a national priority.