Delta hindering hospital, physician group recovery

A jump in new COVID-19 cases dropped margins and volumes.

The boom of COVID-19 cases caused by the Delta variant is hindering the recovery of both hospitals and physician groups.

According to a news release, the latest National Hospital Flash Report from Kaufman Hall saw margins and volumes for hospitals and health systems fell across key metrics compared to 2019 levels, after hospitals and physician groups experienced setbacks in July as the Delta variant drove a dramatic spike in new COVID-19 cases and hospitalizations.

Meanwhile, revenues were greater than those seen in 2019, but the gains were offset by escalating expenses and the data suggests that some patients may once again be postponing non-urgent procedures and other outpatient care because of the increase in COVID-19 cases, the release says.

“Hospitals likely will face additional setbacks with continued spread of the Delta variant and concerns over diminishing protection from the COVID-19 vaccines,” Erik Swanson, a senior vice president of Data and Analytics with Kaufman Hall, says in the release. “Not surprisingly, hospitals in the regions with the highest rates of the variant were most affected in July, and we expect those impacts to deepen in the months ahead.”

Among physician groups, expenses increased in the second quarter of 2021 compared to pre-pandemic levels as well as continued high investments required to shore up insufficient physician revenue. These, along with the rising COVID-19 rates are causes for concern despite increases in productivity and revenues for the quarter, the release says citing Kaufman Hall’s Physician Flash Report.

“Physician practice volumes and productivity are returning to pre-pandemic levels across much of the United States, which is a promising sign,” Matthew Bates, managing director and physician enterprise service line lead with Kaufman Hall, says in the release. “At the same time, rising expenses and high levels of investment remain a significant challenge for physician groups.”

According to the reports, actual hospital margins remained narrow with a median Kaufman Hall hospital Operating Margin Index of 3.2 percent in July not including federal CARES Act funds. Operating margins were down 7 percent year-to-date compared to the first seven month of 2019 with the CARES funding due to rising expenses for higher acuity cases including COVID-19 patients. Operating margins jumped 83.9 percent year-to-date without federal aid.

Inpatient discharges fell 9.2 percent year-to-date compared to the same period in 2019. Meanwhile, adjusted discharges and emergency department visits also fell below pre-pandemic levels with 3.9 percent and 13.1 percent year-to-date, respectively. Operating room minutes were essentially the same as 2019, according to the release.

Compared to the first seven months of 2019:

  • Inpatient Revenue was up 3.7% YTD
  • Outpatient Revenue rose 10% YTD
  • Total Expense per Adjusted Discharge increased 14.1% YTD
  • Labor Expense per Adjusted Discharge rose 12.5% YTD
  • Non-Labor Expense per Adjusted Discharge jumped 14.6% YTD