Although the financial health of Philadelphia’s businesses remained mostly stable at the start of the COVID-19 omicron variant surge in December, there was one exception: health care and social assistance businesses. As the city’s largest sector, this encompasses thousands of care providers, labs, and medical facilities.
The latest data in Pew’s dashboard tracking Philadelphia’s business and jobs recovery shows that 8.5% of establishments in the business of caring for others became severely or moderately late on their bills in December 2021. That percentage was the highest delinquent share yet for these businesses since the pandemic began, double their low point in 2020, and their steepest increase since a previous quarter. The spike stood in contrast to businesses overall, whose share in serious delinquency declined slightly in December to 5.4%, approaching pre-pandemic levels.
Economists and lenders consider a business’s delinquency to creditors—such as suppliers, banks, and credit card companies, though not landlords—one of the many important indicators of its health. Pew’s dashboard regularly monitors nine indicators on business and job conditions and uses Experian credit bureau data to track Philadelphia business payments that are 31 or more days late, on average. Payments made 31 to 90 days late are considered moderately delinquent; 91 or more days late are severely delinquent and a possible precursor to failure; one to 30 days late are mildly delinquent, and not necessarily worrisome.
The health care and social assistance sector provides about a quarter of Philadelphia’s jobs and has historically been resilient amid economic shocks. But COVID-19 has affected this industry more than most, with these business establishments leading all sectors in net closure rates in Philadelphia since early 2020, according to the dashboard’s work locations data.
A deeper dive into credit data
Among child care providers and assisted living facilities for the elderly, the increase in delinquent businesses was dramatic. According to detailed Experian data not shown on Pew’s dashboard, 10.6% of child care providers in Philadelphia made payments 31 or more days late in December, more than double their 4.6% share last June. About 16.3% of assisted living facilities were delinquent in December, nearly quadruple their 4.3% share in June. Those rates reflect payments due up to November of last year, when omicron began surging in Philadelphia but before additional relief funds were available.
About 23% of hospitals in the city were seriously delinquent in December, matching their high point last summer. A few other subsectors were doing better or holding steady, notably nursing care facilities; Their delinquent share plummeted to 5.6% in December, although it bounced up and down a lot last year.
In child care, experts said the increase was not surprising following a year in which enrollment plummeted, many small providers went under, and relief funding came later than anticipated. But experts also expressed hope for progress when the labor situations improves and subsides flow in from the American Rescue Plan.
“Many families using subsidized child care are low-income working families, especially in Philadelphia. They are also the ones who … are not going back to work at minimum wage because of omicron. That means they’re not utilizing these services for their children, and that is causing [providers] to lose revenue,” said Mary Graham, executive director of Children’s Village and a child care business coach, in an interview.
At assisted, the trade group Pennsylvania Health Care Association says a staffing crisis worsening facilities last fall after Philadelphia imposed its vaccination mandate on health care workers, which forced to rely more heavily on temp agencies. Those expenses in some cases outpaced revenues and caused delays in paying bills, said Kevin Cysyk, an association vice president who works with assisted living facilities.
For hospitals, the delinquent share figure has been spiking up and down over the past year. The exact cause of the December increase was not yet clear to the organization charged with tracking the sector’s finances, the Pennsylvania Health Care Cost Containment Council. Barry Buckingham, the council’s executive director, explained that the suddenness of omicron appears to have caused a crisis in cash flow and staffing at the same moment. “It filled all the ICUs and chewed up the resources at a time when personnel were already sick and tired of COVID, plus their staffs were getting sick,” he said in an interview. A recent report from that organization estimated that by the start of September 2021, the state’s hospitals had sustained COVID-19-related expenses and lost $6.9 billion in revenue.
According to the dashboard’s preliminary data, the number of jobs in Philadelphia across the whole health care and social assistance sector was estimated at 164,000 in December, about 8,900 or 5.1% below December 2019. If that estimate is confirmed next month, it would be the worst monthly decline in a year. And across all sectors, job numbers in December were 7.6% below the same month pre-pandemic, showing little improvement since last summer.
How businesses in different ZIP codes are faring
Other notable takeaways from the latest dashboard data reflected positive news for Center City businesses. Their average financial stability and credit balances held steady at a healthier level than earlier in the pandemic. And the share of severely or moderately delinquent Center City businesses fell to 5.1%, approaching its low point for the pandemic. Its high point was 7.5% last March 2021.
The data shows that businesses in a dozen ZIP code areas—out of 52 monitored citywide—are showing signs of progress, hitting their lowest delinquent share since the pandemic began. They included Market East (19107), Chestnut Hill (19118), Olney/East Oak Lane (19120), Manayunk (19127), Fairmont (19130), Holmesburg (19136), and South Philadelphia (19148).
But seven ZIP code areas matched or exceeded their peak delinquency in December. These included Mt. Airy/East Mt. Airy (19119), Brewerytown/Sharswood (19121), Strawberry Mansion (19132), Port Richmond/Kensington (19134), Bridesburg (19137), West Oak Lane/East Germantown (19138), and Girard Estates (19145).
Pew’s Philadelphia research and policy initiative will continue to monitor the city’s economic recovery in future dashboard updates.
Elinor Haider is the director and Thomas Ginsberg is a senior officer with Pew’s Philadelphia research and policy initiative.