Government aid kept Minnesota hospitals afloat in 2020, but a new state report raises concerns about their ability to bounce back in 2022 because of pandemic-related staffing shortages.

Minnesota hospitals would have operated at a loss without a 500% increase in public support because of the pandemic in 2020, according to a report released Tuesday by the Minnesota Department of Health. Now they face problems exacerbated by COVID-19 without that emergency funding.

"The pandemic has laid bare some challenges in the health care system," said Stefan Gildemeister, state health economist.

The report provides one of the first looks at the financial toll of the pandemic on a Minnesota hospital system that was facing money problems before COVID-19 emerged. Almost a quarter of Minnesota's 128 hospitals were financially distressed in 2019, meaning they lost money in four of the last eight years.

Midsized and rural hospitals were struggling the most before the pandemic, but the state report found sharper operating losses in 2020 among larger, urban facilities. Ultimately, no hospitals were spared, especially the past two winters when urban intensive care units were overflowing with COVID-19 patients and rural hospitals had nowhere to transfer the severely ill, said Joe Schindler, the Minnesota Hospital Association's vice president for finance policy and analytics.

"I really haven't seen this in my career where everybody suffered almost equally," he said. "They were all treating COVID patients at the same time. In fact, many times during this last surge, there wasn't a bed to be had. Many patients had to be cared for in place."

Some of the financial pain in 2020 was temporary, including a state emergency order that suspended nonurgent procedures for two months during Minnesota's initial COVID-19 wave. Minneapolis-based Allina Health reported it lost $40 million per week in patient revenue during this two-month period.

Even when regular surgery schedules resumed, patients stayed away from hospitals because of COVID-19 fears, sometimes despite having urgent cardiac or orthopedic needs. Inpatient admissions and outpatient ER visits declined by more than 10% from 2019 to 2020, the state report showed.

The University of Minnesota Medical Center was among several large hospitals that reported multimillion-dollar losses in 2020 after posting gains in 2019, according to financial data released Tuesday along with the report. Government support "didn't fully close" the gap created by the loss of patient revenue, said Hayes Batson, chief financial officer of the Fairview Health System, which operates the U hospital.

"The amount of revenue displacement was hundreds of millions of dollars and the grants were less than half of that," he said.

Government support included more than $2 billion from the federal provider relief fund over the past two years and $200 million in state grants in 2020 for pandemic planning and emergency support for hospitals and other providers.

Patient activity rebounded in early 2021, stabilizing hospital revenue as government support was phased out. However, hospital leaders said the overwhelming volume of COVID-19 patients last fall and winter during the delta and omicron pandemic waves offset some of those gains.

Many COVID-19 patients needed prolonged intensive care and placement on ventilators. The rotating, or proning, of these patients helped their lungs, but the technique often involved six to nine hospital staff members at once.

"We saw much longer lengths of stay and higher acuity of our patients, which essentially led to a lot more resources per patient who had a lot of uncovered costs," Schindler said.

Hospital leaders are hopeful the pandemic will continue to ease and allow them to catch up on overdue orthopedic and other procedures. Pandemic indicators are improving in Minnesota, which on Tuesday reported 306 COVID-19 hospitalizations — down from 1,629 on Jan. 14.

The state also reported nine more COVID-19 deaths and 483 new coronavirus infections — a partial count of pandemic activity over the weekend — and a decline to 3.2% in the positivity rate of COVID-19 testing. However, public health officials remain concerned about viral variants presenting new threats — particularly if immunity from vaccination or previous infection wears off in a few months. An unexpected uptick this month in COVID-19 activity in Europe is also worrying.

Staffing levels have not recovered, hindering hospitals' abilities to increase surgeries and patient care schedules. Hospital jobs dropped from 118,000 in March 2020 to 110,000 during the spring shutdown and recovered marginally to 112,000 by the end of 2021, according to monthly data from the Minnesota Department of Employment and Economic Development.

Jobs in long-term care facilities have not recovered at all and that's a related problem. The lack of transitional care beds exacerbated the shortage of hospital beds during the latest pandemic waves, because doctors couldn't discharge patients when they were ready.

Stopgaps to address staffing shortages have included the use of Department of Defense medical teams. The most recent 25-person team at Allina's Abbott Northwestern Hospital in Minneapolis is ending its deployment Wednesday. Minnesota National Guard units also staffed transitional care sites in nursing homes.

Hospital leaders said they are hopeful that Minnesota lawmakers will approve front-line worker pay bonuses to caregivers who are burned out from two years of exhausting duty, but they need their own aggressive recruitment and retention strategies.

Planned retirements of baby boomers are unlikely to change, but Batson said the hope is to entice younger doctors and nurses to stick around now that the pandemic is apparently easing.

"There is simply no way you can manage this just by attracting more people," said Batson, noting that Fairview has 50% more job postings than is typical. "You've really got to retain the people you have."