The impact of COVID-19 on hospitals’ financial performance: Evidence from California hospitals

ABSTRACT

Background

On 19 March 2020, Governor of California Gavin Newsom announced a statewide ‘shelter-in-place’, issued an executive order for hospitals to pause elective procedures, and requested state hospitals to increase inpatient bed supply to provide sufficient space to treat Covid-19 patients. These orders were lifted one month later, on 22 April 2020. However, these changes may have immediate and long-term impacts on hospitals’ revenue and expenses.

Methods

A linear mixed-effects model was used to capture the effect of Covid-19 on financial performance over time (from 2017 Quarter 1 to 2020 Quarter 4) of the repeated measurements for each hospital, with the interaction from resource availability and ownership structure.

Results

Covid-19 had a negative impact on hospital operating margin (OM) (ß = −.0337, p < .05) but not on the total margin (TM). We found a negative moderating role of staffed beds (ß = −.0001, p < .05) on hospital OM. We observed a positive moderating effect of for-profit hospitals for both OM. (ß = .0419, p < .01) and TM (ß = .0256, p < .05) when compared to not-for-profit hospitals.

Conclusion

Hospital managers need to understand the impact of Covid-19 on hospital financial performance and find ways to help hospitals recover from the pandemic.

KEYWORDS:

• Covid-19
• California
• hospital
• resource
• revenue
• financial performance

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Mengying He

Mengying He, PhD is an Assistant Professor of Management with a Healthcare Management focus in the College of Business and Economics at California State University, Los Angeles.

Mahshid Jessri

Mahshid Jessri, PhD is an Assistant Professor of Management (with emphasis in Entrepreneurship) at California State University, Los Angeles.

Hanze Zhang

Hanze Zhang, MS, PhD is an Associate Director of Biostatistics at Eisai Inc.