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Why Your Local Hospital Is Going Broke During a Pandemic

  • A report out this month from the American Hospital Association found hospitals will face $202.6 billion in losses between March 1 and June 30 this year.
  • That’s an average of $50.7 billion per month.
  • Not being able to perform nonemergency procedures has inhibited revenue streams for all hospitals.

Even in the middle of the worst outbreak since the 1918 flu pandemic, America’s hospitals are hurting.

The pandemic has had a significant impact on hospitals.

Some are hurting financially even if they’re overwhelmed by treating COVID-19 patients. And some are dealing with a lack of patients to treat.

According to a report out this month from the American Hospital Association, hospitals will face $202.6 billion in losses between March 1 and June 30 this year. That’s an average of $50.7 billion per month.

A Health Affairs study reported that it would cost an average of $163.4 billion in direct medical spending during the course of the infection. This was based on a model that assumed 20 percent of the population got COVID-19.

According to another estimate, U.S. patients who are hospitalized due to COVID-19 would cost the system between $362 billion and $1.449 trillion. This depends on the incidence rate, or likelihood of getting COVID-19, according to a report from FAIR Health.

We talked to experts about why this is happening, and if there’s relief coming to medical centers anytime soon.

Hospital hardships

Not being able to perform nonemergency procedures has inhibited revenue streams for all hospitals, says Rick Gundling, senior vice president for healthcare financial practices with the Healthcare Financial Management Association.

David J. Muhs, chief financial officer of the Henry County Health Center in Mount Pleasant, Iowa, says patient volume decreased due to the outbreak.

On average, the daily revenue in the 8 months before the pandemic was $189,141. In March, that declined to an average of $142,463. The revenue further went down to an average of $115,248 a day in April.

Rising costs are slamming hospitals hard. The cost of treating a patient with COVID-19 could be more than $20,000, and that could soar to more than $88,000 if the patient needs a ventilator, a Peterson-Kaiser Family Foundation report states.

FAIR Health estimated the average cost of treating a patient to be $73,300. It costs an average of $38,221 if the patient has in-network commercial coverage.

The Health Affairs study found a single case of COVID-19 — whether it was treated via telehealth or hospitalized — would cost a median of $3,045 in direct medical costs during the course of the infection.

Additional costs after an infection could surge to $3,994.

A single hospitalized case would cost a median of $14,366 during the course of the infection, the study found. That’s four times higher than a symptomatic influenza case and 5.5 times higher than a symptomatic pertussis (whooping cough) case.

We rounded up a few more issues hurting our hospitals.

Hospital avoidance

Delaying surgical procedures and avoiding emergency rooms hasn’t made hospital fiscal health any better. And it will probably continue for a while, Gundling told Healthline.

Even when medical centers do allow nonemergency procedures to resume, there still may be a decline in numbers because people are hesitant to go to hospitals. Still, “you can’t postpone those forever,” Gundling said.

“We saw declines in emergency rooms again as well, again because of that psyche,” he added.

Supply chain wars

Expenses for medical equipment, such as ventilators and personal protective equipment (PPE), contributed to rising costs. Those fees rose dramatically — as has the need for the gear.

As a result of getting hit with extra costs, hospitals — even those that didn’t have a high volume of patients with COVID-19 — are rethinking their supply chain needs and costs.

Muhs, whose hospital only treated a handful of COVID-19 cases, says his hospital was affected by rising PPE costs.

LCMC Health in New Orleans, on the other hand, has treated more than 1,400 cases.

Greg Feirn, its CEO, says his hospital paid 8 to 10 times the normal cost for PPE, which accounted for more than $10 million in additional expenses. The hospital also has to keep enough on hand to handle an expected surge in the fall, he adds.

Another aspect affecting the supply chain was how widespread the virus was, Gundling says.

Because every location wasn’t sure how badly it would be affected, hospitals couldn’t allocate resources to “hard-hit” locations as readily. In past catastrophes, like for hurricanes, that would usually be the case.

“I don’t think there was enough to share,” he said.

Due to its location as a hot spot, Feirn says his facility spent approximately $7 million quickly converting normal med-surge rooms into negative-pressure isolation and ICU rooms to adjust for incoming patients.

Employee issues

Some hospitals are hurting due to staff overtime costs, associated fees for housing and child care, as well as burnout.

On the flip side, hospitals that haven’t been as busy have had to lay off employees yet aren’t able to cease all operations — so they have to keep things running as usual.

Muhs says his hospital had to furlough staff, which he says was extremely difficult.

“The emotional part is the safety of the staff still working and their concern of getting the disease and taking it home to their family,” he said.

Eliminating family visits to the hospital’s attached long-term care facility was “very emotional for the families, residents, and staff,” he added.

“Most of the residents have some form of dementia and don’t understand what is happening. We have set up window visits and face time, but most residents don’t understand what is happening,” he said.

At the same time, the hospital still has to maintain itself at a level that can handle a surge if that is to happen.

“We were not able to reduce the labor pool proportionately due to all the temperature-taking stations that we need to do at all entrances and setting up a respiratory clinic that was separate from the well clinic,” he said.

Lack of financial assistance

Most hospitals are trying to take advantage of federal and state aid as well as stimulus programs. Medicare and Medicaid added a 20 percent increase to cover COVID-19 patients in those plans.

But a Kaiser Family Foundation report points out aspects of coverage for people under commercial insurance plans that aren’t addressed in stimulus programs.

One assessment reported that health systems could lose an average of $2,800 per hospitalized COVID-19 case if payers don’t increase reimbursement rates.

Many would lose between $8,000 and $10,000 per case, it stated.

Financial solutions

Both hospital leaders Healthline interviewed are working to offset the financial burdens.

Muhs says the hospital is delaying a construction project, delaying capital purchases, and reducing their supply expenses except for buying PPE.

They’re trying to take advantage of federal and state financial support programs. The hospital will begin to allow nonemergency procedures to resume in a limited capacity.

Feirn’s financial team is monitoring liquidity so they don’t have to sell investment reserves. They’re limiting capital investments among other measures.

Allowing nonemergency procedures to resume is a top priority, Gundling says. Still, hospitals can’t go back to business as usual.

How they implement physical distancing, crowd control procedures, waiting room processes, and disinfection will be key to building trustworthiness with patients. That will play a part in how quickly patients begin to visit hospitals again.

Telemedicine was able to continue, but it can only be used to a degree for many patients.

In addition to tight oversight of supply chains, hospitals will be faced with having new plans in place for future catastrophes, Gundling says. They will need to look into more quickly putting makeshift hospitals in place.

Maybe new hospitals will be built with more flexible spaces that can easily be transformed into ICUs. Thinking about how to increase and reroute staff as needed will definitely be part of the planning, Gundling adds.

“I think we’ll get over a lot of this stuff,” Gundling noted. “It’s just going to take time.”

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