Despite hope being shipped out in the form of COVID-19 vaccines, U.S. hospitals faced a slow recovery as they entered 2021 with reduced operating margins, lower patient volumes and higher expenses.

A new report from management consulting agency Kaufman Hall gathered margin, volume, revenue and expenses data from 900 hospitals across the U.S. The agency found that, excluding aid from the Coronavirus Aid, Relief and Economic Security Act, hospitals' operating margins fell an average of 4.6 percentage points in January 2021 compared to January 2020, with operating EBITDA margins down 4.2 percentage points. Even taking into account federal aid, operating margin fell 4 percentage points, the report's authors said.

Patient volumes had not recovered by the new year, the report showed. Compared to January 2020, adjusted discharges — a way of measuring hospital profitability — dropped 17.6%, while operating room minutes dropped 16.6%.

During a fourth-quarter earnings call Feb. 2, HCA Healthcare Inc. CFO William Rutherford said the company did not anticipate its inpatient admissions or outpatient volumes rebounding to pre-pandemic levels this year. While inpatient volume is expected to exceed 2020 levels, Rutherford said it is likely to remain between 1% and 3% below 2019 levels.

Likewise, Tenet Healthcare Corp.'s 2021 outlook includes inpatient admissions returning to 90%-95% of their 2019 level, with outpatient admissions reaching just 85%-90%.

January also saw a large drop in COVID-19 hospitalizations across the U.S. — from an all-time high of 132,474 on Jan. 6 to 95,013 as of Jan. 31, according to data from the COVID Tracking Project. This trend likely contributed to a 2.3% decline in patient days in January, after two consecutive months of year-over-year increases in in-patient volume, the Kaufman Hall report said.

For the ninth time in the past 10 months, hospitals' outpatient revenue declined year over year in January, this time by 10.4%. This impacted gross operating revenue, which declined 4.8% year over year when not including federal aid, although inpatient revenue increased 1.3%.

Expenses increased 4.5% year over year in January due to the amount of personal protective equipment and extra labor required for COVID-19 patients and other individuals needing a high level of care, the report said.

"While national CDC metrics show some signs that the country may be turning the corner on the pandemic, its repercussions for the healthcare industry will persist indefinitely," the report stated. "The January performance results reflect the continued burden on U.S. hospitals and health systems, and emphasize the importance of remaining vigilant in combatting the virus and moving these vital institutions toward recovery."

'A difficult year in the emergency room'

Emergency department volumes were especially impacted in January as patients avoided ERs due to a perceived risk of COVID-19 infection. Volumes dropped 24.7% year over year, continuing what the report described as a trend of double-digit year-over-year declines every month since March 2020.

During a Feb. 10 earnings call, Tenet President and COO Saumya Sutaria said the biggest factor preventing the hospital chain from predicting when its volumes will fully recover is emergency department visits, which have slowed.

"If schools and sports and other things open up, the categories that have had the most decline in demand — the types of sports injuries, kids' needs for respiratory illness or other things — [as those] begin to come back, that will make a big difference," Sutaria said.

HCA CEO Samuel Hazen said it had been "a difficult year in the emergency room."

"Our throughput continues to be reasonable given some of the pressures we've seen with the acuity of patients," Hazen said during the Feb. 2 call. "So we continue to be optimistic about the purpose and the role that our emergency rooms play to our system, but we have seen some change in overall mix, and that will put downward pressure on capital needs that we had historically."