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Coronavirus

COVID-19: Unprecedented Fiscal Challenges for NJ Hospitals

Plummeting revenues and rising expenses during New Jersey’s COVID-19 crisis have had a severe impact on hospitals’ finances, with the statewide hospital operating margin plunging to negative 30%, according to a financial impact analysis from the New Jersey Hospital Association.

NJHA’s Center for Health Analytics, Research and Transformation surveyed the state’s acute care hospitals for fiscal impacts of the pandemic for March and April. The aggregated responses show that hospital revenues fell 32% – or $650 million monthly – largely due to the suspension of elective procedures. Gov. Murphy announced Friday that those procedures, suspended by executive order March 27, will resume starting May 26.

Since coronavirus was first confirmed in New Jersey March 4, hospital expenses increased 10.6%, or $214 million per month. Those increases are associated with the costs of supplies, especially personal protective equipment, and staff, including overtime and increased demands for supplemental or per-diem staff. This figure does not capture the expenses associated with hospitals’ expansion of bed capacity.

“COVID-19 is an unprecedented event for our healthcare system, and our hospitals have directed all of their resources at it, including extraordinary efforts to expand capacity that kept our state ahead of the curve,” said NJHA President and CEO Cathy Bennett. “Unfortunately, that doesn’t come without risk to hospitals’ own fiscal health.”

With Executive Order 109’s suspension of most elective surgeries and procedures, hospitals focused on COVID care, decompressing their surgery and procedure schedules to trauma and emergency care, labor and delivery, and life-saving surgeries. Consequently, N.J. hospitals are reporting significant declines in several key areas. Hospital volume is down for non-COVID inpatient admissions, emergency room visits, outpatient procedures and laboratory, radiology and other diagnostic tests, said Sean Hopkins, senior vice president of CHART.

“Modeling the impact of these combined revenue losses and expense increases, the statewide hospital average margin fell from 4.3% at the beginning of the pandemic to approximately negative 30% now,” said Hopkins.

Added Bennett, “COVID-19 demonstrates that even healthcare – long assumed to be immune to economic downturns – is vulnerable in an event of this magnitude that requires hospitals to target virtually all of their resources at the public health crisis.”

The CHART bulletin can be found at http://www.njha.com/media/600402/COVID-19-Financial-Impact.pdf. Visit www.NJHA.com/chart for additional data resources from NJHA.

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