How did Oregon hospitals fare after a rough 2020? It depends on who you ask

But Oregon Health Authority, hospitals agree: Federal relief funding was key

SALEM, Ore. (KTVZ) -- The Oregon Health Authority released statistics Thursday that showed Oregon hospitals were profitable as 2020 ended, despite the COVID-19 pandemic challenges. But the hospitals' association responded that other data paints clear a less-rosy picture.

First, a news release from OHA;

Oregon hospitals end 2020 in the black

Statewide hospital financials show $483 million in operating margin despite pandemic

Data released by the Oregon Health Authority today shows hospitals ended 2020 in the black, with a surplus for the year of $483 million representing a 3.3% statewide operating margin, including CARES Act funding. Hospitals statewide ended the year with positive margins and net patient revenue returning to trend in Q3 and Q4 after falling sharply in the second quarter of 2020.

While improved from its lows in Q2 of 2020, net patient revenue (NPR), revenues derived from direct care to patients, did not completely counter the drop in Q2, when much of the state was shut down. But the recovery in NPR, coupled with CARES Act funding, saw hospitals ending 2020 with a positive margin. In 2020, Oregon received CARES Act funds likely in excess of $620 million statewide. The 2020 margins were not as high as in 2019, when hospitals ended the year with a 5.3% margin, representing $762 million in profit.

Meanwhile, hospitals’ total margin – which includes investment income as well as CARES Act funds – was 6.6% of revenue statewide, or $983,514,298.

“Due to the CARES Act and investment income, along with a robust return to nearly normal operations in Q3 and Q4, Oregon hospitals had a positive year in 2020 from a financial perspective,” said Jeremy Vandehey, director of OHA’s health policy and analytics division. “We’re grateful to hospitals and particularly their staff for their service to Oregonians in this unprecedented global pandemic. With that said, these 2020 financial results, combined with 2019’s high margins, yet again demonstrate the need for our state’s newly created cost growth target program designed to get the cost of health care under control.”

• Hospital Net Patient Revenue, Total 2020: $13,144,101,486
• Hospital Operating Margin, Total 2020: $483,771,479
• Hospital Total Margin, Total 2020: $983,514,298

Overall utilization was down from 2019 but showed a strong recovery in the second half of the year from the lows of Q2 of 2020. Inpatient discharges are down 10.5% when compared with 2019, but rose 14.7% in Q4 compared with Q2 2020. Similarly, outpatient surgeries were down 16% from 2019 levels but up 55.3% in Q4 when compared with Q2 2020. And emergency department visits ended the year down 17.2% from 2019 but up 16% in Q4 compared with the lows of Q2 2020.

Despite utilization being down in comparison with 2019, operating expenses increased in the second half of 2020. Total operating expense was $3.7 billion in Q4, an increase of 4.3% from Q4 2019. Year-end total operating expense totaled $14.0 billion, an increase 2.4% or $330 million from 2019.

By one measure, Oregon hospitals experienced higher margins than peers around the nation. In a recent study, consulting firm KaufmanHall found that hospitals nationwide averaged an operating margin of 2.7% after CARES Act funding boosts. Oregon hospitals were at 3.3%.

The full data set is available on the OHA hospital financial and utilization dashboard. 

A short time later, the Oregon Association of Hospitals Health Systems issued this news release:

Lake Oswego, Ore. – May 13, 2021 – Becky Hultberg, President and CEO of the Oregon Association of Hospitals and Health Systems (OAHHS), released the following statement in response to the OHA statement on hospital margins:

“Oregon’s hospitals and health systems have been there for Oregonians during the pandemic while facing their greatest financial crisis. Because of that, in a time of great uncertainty, Oregonians could feel safe and confident during a once in a lifetime pandemic. Many hospitals, especially those in rural parts of the state, were pushed to the financial brink in 2020 by revenue losses from cancelled non-urgent  procedures and increased costs for PPE, staffing shortages and challenges, bed capacity challenges, and caring for COVID patients. 

These costs are reflected in figures for operating margins, which offer a more accurate look at hospital finances. Operating margins have been propped up by last year’s infusion of CARES Act funds. Without that infusion, the median operating margin in 2020 was -2.1 percent. One in three hospitals in Oregon lost money in 2020. Last year, Oregon’s hospitals did not come close to covering their total operating expenses. In 2020, net patient revenue was 6.5 percent lower than total operating expenses.

Congress moved quickly to make sure hospitals would not experience disruptions during the pandemic that would put community health at further risk. That was the right thing to do.

While vaccines have given us hope, the pandemic is not over. Just two weeks ago, rising hospitalizations triggered new restrictions in 15 Oregon counties. It’s in everyone’s interest to keep hospitals stable and strong, so that Oregonians can have peace of mind knowing their local hospital is open and ready to care for them.”

About OAHHS: Founded in 1934, OAHHS is a statewide, nonprofit trade association that works closely with local and national government leaders, business and citizen coalitions, and other professional health care organizations to enhance and promote community health and to continue improving Oregon’s innovative health care delivery system.