Hospital Finances During the First Two Years of the COVID-19 Pandemic: Evidence From Washington State Hospitals

Abstract

The COVID-19 pandemic created a broad array of challenges for hospitals. These challenges included restrictions on admissions and procedures, patient surges, rising costs of labor and supplies, and a disparate impact on already disadvantaged populations. Many of these intersecting challenges put pressure on hospitals' finances. There was concern that financial pressure would be particularly acute for hospitals serving vulnerable populations, including safety-net (SN) hospitals and critical access hospitals (CAHs). Using data from hospitals in Washington State, we examined changes in operating margins for SN hospitals, CAHs, and other acute care hospitals in 2020 and 2021. We found that the operating margins for all three categories of hospitals fell from 2019 to 2020, with SNs and CAHs sustaining the largest declines. During 2021, operating margins improved for all three hospital categories but SN operating margins still remained negative. Both changes in revenue and changes in expenses contributed to observed changes in operating margins. Our study is one of the first to describe how the financial effects of COVID-19 differed for SNs, CAHs, and other acute care hospitals over the first two years of the pandemic. Our results highlight the continuing financial vulnerability of SNs and demonstrate how the factors that contribute to profitability can shift over time.

Citation

Carroll, N.W., Shih, S.-F., Karim, S.A. and Lee, S.-Y.D. (2024), "Hospital Finances During the First Two Years of the COVID-19 Pandemic: Evidence From Washington State Hospitals", Hefner, J.L., Cross, D.A. and Shay, P.D. (Ed.) Research and Theory to Foster Change in the Face of Grand Health Care Challenges (Advances in Health Care Management, Vol. 22), Emerald Publishing Limited, Leeds, pp. 143-160. https://doi.org/10.1108/S1474-823120240000022007