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Hospitals Finish 2021 in Weakened Financial Position as Omicron Wave Hit

Continued workforce shortages, higher expenses and flat revenue threaten recovery 

Oregon’s hospitals finished 2021 in a declining financial position compared to 2020 just as the Omicron variant was about to push the system to the breaking point for the second time in a year, according to a yearly data report from Apprise Health Insights.

Read the CY 2021 report here
 
Persistent staffing shortages with rising labor costs, longer patient stays, general inflation, and other factors combined to push expenses higher while revenue remained stagnant last year. The result was lower margins in 2021 compared to the previous year: 25 hospitals (42 percent) finished the year with a negative operating margin. The median operating margin in 2021 was 3.1 percent, down 30% since 2019.

The margins would have been even lower if not for one-time federal CARES Act dollars included in the 2021 balance sheets and are thought be unsustainable given continued rising costs and inflation. The aggregate margin last year was 2.0 percent with CARES Act funds included and 0.4 percent with those dollars excluded.

“The data show the significant financial impact on hospitals in 2021 from COVID, including rising expenses and flat revenue,” said Andy Van Pelt, CEO of Apprise. “While many are ready to move on from COVID, Oregon hospitals are facing several challenges that have no easy fix.”

For the fifth quarter in a row Net Patient Revenue (NPR) fell short of Total Operating Expenses (TOE). Labor costs, which make up over half of a hospital’s expenses, have risen 26 percent since early 2019. Much of that total is a direct result of the staffing shortage which has forced hospitals to hire and pay travel nurses at rates many multiples of what staff nurses are paid. The total for other expenses such as housekeeping, IT, utilities, and insurance have risen 18 percent since 2019. The current general inflation rate of 8.5 percent is not reflected in these numbers.

The staffing shortage has also broken the continuum of care as the inability to discharge patients to a more appropriate level of care has led to longer lengths of stay, while patients waiting for a staffed bed are boarded in the ED. The longer lengths of stay are also driven by higher acuity patients, many of them very sick with COVID, which leads to lower revenues.

Another shift from 2021 was the weaker financial performance of larger urban hospitals compared to their rural counterparts, which benefited greatly from the infusion of CARES Act funds. With major challenges continuing into 2022, especially the workforce crisis, Apprise analysts say they don’t expect an environment favorable to recovery this year.
 
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