Do U.S. Hospitals Have A Case of Long-Haul COVID?

Liz Sweeney
7 min readNov 21, 2021


This is part 2 of a 3-part series on U.S. hospitals, capital markets, and the impact of the coronavirus. Watch the introductory video. Read part 1.

In our view, the U.S. hospital industry’s response to COVID-19 has been exemplary. Early in the pandemic, many hospitals, often at the request of state governors, eliminated most non-COVID, non-emergency care to preserve capacity for an expected surge of pandemic-related cases. They moved quickly to ramp up telemedicine capabilities, acquire additional supplies and protective equipment, set up command centers to monitor the trajectory of the virus and system capacity, and even collaborated with competitors to build field hospitals. Subsequently, as the pandemic ebbed and surged, hospitals adjusted their operations to accommodate both COVID and non-COVID patient volumes simultaneously, reimagined long-standing patient experiences such as check-ins and waiting rooms and implemented protocols to dial back access to non-emergency care during COVID surges.

Medicare hospitalization trends. Source: Centers for Medicare & Medicaid Services (CMS)

These are just a few examples of the myriad ways the hospital industry worked tirelessly and selflessly to treat and prevent COVID-19 while maintaining patient access to the extent possible. But what does the pandemic mean for the health and sustainability of the sector? In many ways, hospital performance resembles long-haul COVID, an informal term for a range of lingering and sometimes debilitating effects experienced by some recovering COVID patients. These patients get through the worst of COVID’s effects, but full recovery is just out of reach.

Volumes and Revenue Still Down

Even with hospitals in some states reporting being overwhelmed with COVID cases, overall hospital volumes remain lower than they were before the pandemic. The expected surge of patient volume from pent-up demand hasn’t really occurred as consumer reluctance to return to healthcare facilities seems to be lingering despite rising vaccinations rates and some aspects of life slowly returning to “normal”. S&P Global and Moody’s reported median revenue at nonprofit hospitals declined by 2.4% and 1.9%, respectively, in 2020.[i] Revenue declines are very rare in the healthcare industry, and it’s even more striking in 2020 because of the sizable amount of revenue received as operating support from the federal government, including the CARES Act’s Provider Relief Fund and the American Rescue Plan Act.

Source: U.S. Census Bureau, Quarterly Services Survey. Trendline added

Expenses Soar

Even as volumes and revenue declined, hospitals had limited ability to reduce expenses commensurately. Global supply chain shortages caused costs to soar on protective equipment, ventilators, and other supplies. As the pandemic wore on, staff turnover rose from burnout and personal safety concerns, causing acute staffing shortages. S&P reported that salaries and benefits as a percentage of net patient revenue rose in 2020 to 60.2%, a 3.5 percentage point increase from the prior year.[ii] In a recent sector commentary, Moody’s predicted that “labor shortages will strain performance even as the pandemic ebbs” and that “clinical and nonclinical staffing shortages will dampen margin recovery for the remainder of 2021. Labor challenges could even lead to more union activity and labor strikes.”[iii] Exacerbating staffing shortages have been employee departures and terminations over vaccine mandates imposed by many health systems and more recently by the Biden administration.

Source: S&P Global Ratings, U.S. Not-for-Profit Acute Health Care 2020 Medians, Aug. 30, 2021

Other challenges

If the combination of lower revenue and rising expenses wasn’t challenging enough, hospitals face uncertainty as the bulk of federal stimulus funding has already been distributed, but the operating environment has by no means returned to normal. And in COVID hot spots operations are periodically disrupted as ICUs have in some places overflowed with COVID patients causing non-COVID care to be diverted or delayed. Hospitals also expect Medicare payment cuts that were postposed during the pandemic to resume in the near to medium term due to federal budgetary stress caused by pandemic-related fiscal support.

Pre-existing conditions

Current stresses on the hospital sector come on top of pressures that existed prior to the pandemic, which haven’t gone away. These include rising pharmaceutical supply costs; the long-term worsening of the payor mix as more of the population falls under government-sponsored insurance; increasing consumer expectations for a more seamless digital experience including price transparency; and the rise of a host of nontraditional competitors, including tech giants, private equity firms, and healthcare insurers. Moody’s had a negative outlook on the nonprofit healthcare sector prior to the pandemic for these reasons, then briefly went to stable in early 2020 before reverting to negative once again when the pandemic hit the U.S. Moody’s outlook remains negative today, while the other agencies echo the same concerns, but lean more heavily on the industry’s strong balance sheets and history of management resiliency for their stable sector outlooks.

Margin compression

These factors combined are causing margin pressure on hospitals. Rating agencies reported operating margins at 10-year lows in 2020 despite federal government support, causing some industry observers to call the situation “wholly unsustainable”. S&P estimated that federal operating support amounted to a 4% boost to operating margin in 2020 [iv], a substantial amount considering that median operating margin was just 1.6% with federal support, a 10-year low. Reliance on federal support for even small positive bottom lines causes angst over the prospect for hospital sustainability as federal support rolls off.

Source: S&P Global Ratings, “U.S. Not-for-Profit Acute Health Care 2020 Medians”, Aug. 30, 2021; Moody’s Investors Service, “Medians — Financial Performance Declined in 2020 after Pre-Pandemic Stability”, Sept. 9, 2020; Fitch Ratings, “2021 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems” (fiscal 2020 median ratios). Aug. 3, 2021

Do U.S. Hospitals Have a Case of Long-Haul COVID?

Will the hospital industry ever get back to “normal”, or does it have a case of long-haul COVID, where it has recovered enough to be taken off life support, but is hobbled by lingering effects, even as the pandemic ebbs? In the spring of 2020, it was reasonable to believe that pandemic-related disruption was temporary. Cancelled procedures, high supply costs, and tight staffing would all revert to normal after a brief period of intense virus activity, we thought. The federal government stepped in with funding to help in the meanwhile. But as the pandemic has stretched out, it’s clear there are deeper and broader issues with the global supply chain, staffing shortages and salary inflation are worsening, consumer behaviors toward accessing healthcare services may have changed forever, and certain pre-existing challenges are still present or accelerating. With revenues down and expenses up, and no clear path to realignment, management teams are running harder than ever just to stay in the same place or avoid losing more ground.

To be sure, the industry’s strong liquidity remains outstanding and provides a powerful bulwark in the near to medium term, and the industry has historically proved agile in periods of stress. Consequently, we do not expect sizable increases in distress and default. However, not all hospitals have strong balance sheet cushions, and those that do know that strong liquidity isn’t a long-term solution to operating stress. Whether the industry can fully recover from its case of long-haul COVID depends on many factors, including the trajectory of the pandemic, the supportiveness of federal policy, management agility, the recovery of labor markets, normalization of the supply chain, actions of nontraditional competitors, and consumer behavior. In the third and final installment of this series, we’ll explore what the operating environment may look like as hospitals emerge from the pandemic.

If you missed Part 1 of our series — Healthcare Providers Are Essential. Do Capital Markets Agree?we explored whether the public’s elevated understanding of the essentiality of the hospital sector and the federal government’s financial support for hospitals during the COVID-19 pandemic has changed the way capital markets view the sector.

In Part 3 — U.S. Hospitals Emerging into A Changed World — we’ll look at how the pandemic is accelerating certain pre-pandemic trends, the changing nature of competition, and what consumers want from healthcare providers now more than ever.

Liz Sweeney is Senior Consultant, U.S. Public Finance at SwissThink, which offers learning solutions and consulting for credit markets. She is also a board member of University of Maryland Medical System and a debt advisor to nonprofits and municipalities.

[i] Moody’s, “Not-for-Profit and Public Healthcare U.S. Medians — Financial Performance declined in 2020 After Pre-Pandemic Stability”, Sept. 9, 2021; S&P Global Ratings, “U.S. Not-for-Profit Acute Health Care 2020 Medians, Buoyed By Government Funding and Strong Investment Returns, Remain Largely Stable”, Aug. 30, 2021; Fitch Ratings, “2021 Median Ratios: Not-for-Profit Hospitals and Healthcare Systems” (fiscal 2020 median ratios), Aug. 3, 2021

[ii] S&P Global Ratings, “U.S. Not-for-Profit Acute Health Care 2020 Medians, Buoyed By Government Funding and Strong Investment Returns, Remain Largely Stable”, Aug. 30, 2021

[iii] Moody’s Investor Service, “Labor Costs, Patient Volumes, Insurer Mix and US Policy will Influence Credit Quality”, July 26, 2021

[iv] S&P Global Ratings Webinar “U.S. Not-for-Profit Acute Health Care — 2020 Medians and Sector Update”, replay available:



Liz Sweeney

Board member and public finance expert with specialties in credit analysis, debt advisory, municipal disclosure, ESG and climate change.