In its December Hospital Flash Report, Kaufman Hall identified and reviewed the continued, negative impact of COVID-19 on hospital operating margins. After a dramatic drop in hospital margins during the height of the pandemic in 2020 and early 2021, hospitals experienced a fluctuation of decreasing and increasing margins in the latter-half of the year. Overall, hospital margins remain significantly narrower than they were in 2019, before the pandemic. As a result, the industry may see an increase in hospital transactions in 2022 to offset the operational and financial hardships that continue to burden the health care system, as described in greater detail below.
In general, minor year-end improvements in 2021 hospital margins are overshadowed by the overall decrease compared to hospital margins in 2019.
The Hospital News Flash Report indicates an increase in the median change in Operating Margin, not including federal CARES Act funding, of 8.1% between October and November 2021, following two months of month-over-month percent decreases. While the short-term margin increase is a welcome change for hospitals, hospital margins remain depressed compared to the pre-pandemic levels in 2019. Not including CARES Act funding, the median change in Operating Margin dropped 22.1% from November 2019 to the end of 2021.
Additionally, while hospitals experienced a decrease in the volume of discharges, patient days, and emergency room visits...
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