Lost hospital revenue comes into view as elective surgeries resume
Thursday, May 07, 2020
The American Hospital Association has released a new report that suggests cratered healthcare finances as a result of COVID-19 have been disproportionally devastating for hospitals and health systems. The report says losses to these organizations will surpass $200 billion during the first four months of the outbreak from March through June 2020.
The losses are not directly related to coronavirus itself but are due to the massive ancillary response to curbing the spread of the virus, including losses from canceled surgeries; the need to procure additional personal protective equipment; and financial outlays required to offer frontline healthcare services.
Losses that come from canceled surgeries are expected to surpass $160 billion during the four months analyzed.
Canceled elective surgeries are certainly a factor, but the cost of providing care to patients affected by the virus has cost hospitals, as they’ve had to spend much more to treat coronavirus patients than their pre-COVID-19 typical patient. Some of the COVID-19 patients are seriously ill and can require weeks of treatment in intensive care units.
So far, health systems have received about $175 billion in funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other rescue bills. Per the AHA, more funding may be needed to keep the national health system robust enough to serve new and current needs.
AHA is lobbying for more, given the devastating losses of more than $50 billion per month. The organization notes that the number of uninsured could rise to as high as 40 million — approaching pre-Affordable Care Act numbers — which could also lead to more charity care and write-offs.
This shortfall is intense and overbearing, and the recent stimulus of $100 billion infused into these health systems falls significantly short of the hole.
A report from March by Strata Decision Technology projected “a worst-case scenario where 97% of hospitals lose an average of $2,800 per case and many [are] losing between $8,000 and $10,000.” At the time, the scenario included the lack of federal government reimbursements for premiums on COVID-19 patients.
In April, Quorum Health Corp., which operates two dozen hospitals in 14 states, said it was preparing for the possibility of bankruptcy. It was on shaky ground even before the COVID-19 pandemic.
The health system covers rural areas. Hospitals in these areas are losing money hand over fist. Elective surgeries are the bread and butter for most of these organizations. Their cancellations are only meant to limit the number of people circulating through hospitals. In some cases, they require extended hospital stays.
These events are not necessarily urgent, but the longer the case goes untreated, the more likely the event becomes just that.
In Minnesota, Gov. Tim Walz said on April 30 that he’d hoped to resume some services soon, including a return to elective surgery. "That has several implications,” he said. “It has the implication of relieving the pain of the people who are out there waiting. If you're waiting for a knee, hip, or back surgery, this has not been easy. You would not call that elective. You would call it necessity.
"It starts to add revenues back to the hospitals," Walz added, "and it starts to bring people back to work. This has to be done in coordination with the hospitals. The hospitals will know, looking at their PPE numbers, the modeling projection, and what we have in reserve ... when to start rolling people back into normal care."
Recently, CMS Administrator Seema Verma announced guidelines on how hospitals can move to “Phase I” of providing nonemergent, non-COVID-19 care in states and regions where coronavirus outbreaks are deemed under control.
Phase I criteria mean hospitals must have plans to conserve supplies, maintain capacity for surges, and ensure appropriate cleaning and protections for patients.
“This isn’t going to be like a light switch,” Verma said. “It’s more like a sunrise where it’s going to be a gradual process.”
Some GOP-led states, like Oklahoma and Texas, have announced plans to get back into elective procedures, saying that their hospitals could handle a surge.
As hospitals continue to struggle, the procedures likely can’t come soon enough.
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