The Financial Fragility of For-Profit Hospitals: Evidence from the Covid-19 Pandemic
36 Pages Posted: 25 Oct 2021 Last revised: 2 May 2022
Date Written: October 2021
We estimate the likelihood of financial distress of U.S. hospitals in 2020 due to the COVID-19 pandemic using AHA Annual Survey data for 2011-2019 and smartphone mobility data for 2020. We find that while the average likelihood of distress across all hospitals is 28.53 % in 2020, slightly increasing from 2019, for-profit hospitals are much more likely to be distressed. Their average likelihood of financial distress is 39.13 %---a 6.93 percentage point increase from 2019. For-profit hospitals are the main providers of specialty health care services, such as psychiatric and acute long-term care, so their increased likelihood of distress poses a risk to service provision in these specialty areas, and particularly in rural communities. Our prediction model based on mobility data performs very well in sample against actual data and can potentially help policymakers and hospital administrators to monitor financial distress in real-time when case mixes change, or other large shocks materialize.
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