April 21, 2022
Operating margins for Minnesota hospitals and health systems sharply declined in 2020, with 33 hospitals and health systems reporting financial losses for the year, according to a report released April 19 by the Minnesota Hospital Association (MHA).
The report analyzes audited fiscal year (FY) 2020 financial data – the most recent available – for hospitals and health systems.
The median operating margin in 2020 decreased to 1.2%. Hospital and health system operating margins were already faltering prior to 2020. However, the effects of the pandemic accelerated that declining trend and are predicted to last for several years.
Without the short-term federal and state financial relief, 2020 likely would have been a lot worse for hospitals and health systems, right when the community needed them most.
“Hospitals and health systems have proven time and again that they will be there when Minnesotans need them. That is our mission,” said MHA President and CEO Rahul Koranne, MD. “However, an increasingly unsustainable financial model is resulting in increased financial pressure that calls into question the viability of our statewide care system. As we are hopefully entering a new pandemic stage, Minnesota’s hospitals and health systems urgently need policymakers and community leaders to continue stepping up to ensure that Minnesotans will always have access to the right care at the right time across all parts of the state.”
The MHA report indicates four main factors in the decreasing financial health of Minnesota hospitals and health systems in 2020:
The pandemic exacerbated the already declining median operating margins for Minnesota hospitals and health systems to 1.2% in 2020.
Without federal and state COVID-19 financial intervention, most Minnesota hospitals and health systems would have been operating in the red.
Most COVID-19 patients were on government-sponsored health programs that compensate hospitals and health systems significantly below the actual cost of care.
A worsening workforce shortage dramatically increased staffing costs.
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