5 Things about Payers’ Financial Performance amid Pandemic

The pandemic weighed heavily on the financial performance of not-for-profit hospitals in 2020. But some of the larger health systems remained profitable despite the upheaval — in large part, thanks to substantial federal funding earmarked to prop up providers during the global health crisis, according to the KFF report.

1.  Pandemic dropped the level of revenue overnight: The first half of the year hit providers especially hard as volumes fell drastically, seemingly overnight. Revenue plummeted alongside the volume declines as the nation paused lucrative elective procedures to preserve medical resources. One estimate showed hospitals lost more than $20 billion as they halted surgeries in the early months of the outbreak in the U.S.
2. Cut off to mitigate expenses: As the year wore on, the outlook improved as some volumes returned closer to pre-pandemic levels. At the same time, health systems worked to cut expenses to mitigate the financial strain. Gross margins per member per month among individual plans and fully insured group plans were 4 percent and 16 percent higher, respectively, than they were in 2019 whereas Gross margins per member per month among Medicare Advantage plans were 24 percent higher in 2020 than they were in 2019.
3. Stress in the Stocks and shares: Initially, the pandemic had put stress on the stock market as uncertainty around the virus and its duration ballooned. The stock market took a dive and it was reflected in some six-month financials as both operations and investments took a hit. Annual loss ratios in the Medicare Advantage market decreased by 2 percentage points from 2019, and are now below the 85 percent minimum required by law, meaning those insurers could face penalties whereas Annual loss ratios in the Medicaid managed care market decreased 4 percentage points from 2019, but met the 85 percent minimum requirement.
4. Increase in Medicaid Enrollments: The providers that were able to weather the storm of the pandemic tended to be integrated systems that had a health plan under their umbrella. Employer-based coverage experienced a modest decrease through September, while Medicaid enrollment increased substantially.
5. Lack of funds hit the harder: “Without the stimulus funding, it is very likely we would have seen more issuers [hospitals/health] systems experience either lower profitable margins, or outright losses from operations,” Kevin Holloran, senior director of U.S. public finance for Fitch Ratings said.