Originally published July 20, 2023 6:00 pm PDT
A recent study has called into question the distribution of COVID relief funds, suggesting that the federal aid may have been too generous or poorly targeted.
The findings challenge the prevailing industry narrative that many hospitals were financially crippled due to the pandemic.
The study, published in the JAMA Health Forum, analyzed more than 4,223 hospitals and discovered that an overwhelming 75% of U.S. hospitals saw an increase in their operating income during the pandemic’s peak, aided by relief funds, Axios highlights.
Operating margins, which reflect the difference between operating revenues and expenses, reached a record high during the first two years of the pandemic, 2020 and 2021.
The analysis revealed that the average operating margins of the hospitals increased from 2.8% prior to the pandemic to 6.5% during the first two years of the pandemic.
The study authors noted, “This resulted in moving many hospitals to peak historical operating margins (i.e., profitability), rather than simply restoring them to prepandemic operating margins.”
Despite the pandemic-related challenges in 2022, such as inflation and rising costs, hospitals’ margins continue to show signs of improvement.
Interestingly, over half of the hospitals analyzed, numbering more than 2,000, did not suffer financial distress due to the pandemic.
Nevertheless, these facilities received relief funds, which contributed to their increased profitability.
However, the authors stressed the need for a better strategy for public funds allocation during a health crisis.
While policymakers reacted quickly regarding emergency relief, “it will be important to consider alternative ways of allocating scarce public dollars to support our nation’s health system in crisis,” they advised.
The American Hospital Association (AHA) offered a different perspective, stating that nearly half of all hospitals still have negative operating margins.
The study also found that teaching hospitals, disproportionate-share hospitals, and urban-centered facilities received more government funding.
Additionally, only 6.4% of the studied hospitals reported significant financial losses, with a median decline of $8.9 million in operating income.
The study authors concluded with a note of caution about the future allocation of relief funds:
“COVID-19 relief funds went to some hospitals that did not need financial support or the amount of funding allocated,” they wrote.
