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April 28, 2020

Experts Are Predicting Big Financial Impacts on Healthcare Systems due to COVID-19

Artemis Health

The work being done by frontline healthcare providers has been highlighted and cheered by grateful people all over the world. Doctors and nurses of all specialties and backgrounds are showcasing their bravery, dedication, and resilience in the face of the COVID-19 pandemic. Some are brand-new medical school graduates, while others have come out of retirement to help coronavirus patients. 

We’re all aware of the challenges facing these frontline health workers, whether it’s long hours, lack of protective equipment, difficult treatment choices, or risk of exposure to the virus themselves. But they are all part of a larger healthcare ecosystem that is under strain during the coronavirus pandemic. We wanted to walk through how healthcare providers, from large hospital systems to rural clinics, will see financial impacts due to COVID-19. 

Lost elective procedure revenue. 

How could hospitals, which are busier than ever, be facing lost revenue during the pandemic? Elective procedures are a major source of revenue for healthcare providers, and they have been cancelled or postponed all around the world.

If you’re one of the thousands of patients who have had to cancel an elective procedure during the pandemic, you may be dealing with chronic pain and terrible discomfort. When the public hears “elective,” they’re likely thinking of procedures like tummy tucks and rhinoplasty. The way hospitals are triaging these surgeries is actually more complicated. An article in USA Today dives into specifics at the Northwell hospital system in New York: 

“Northwell is now using more specific language to describe surgeries: Emergent, urgent (which can be delayed for up to a month), planned (which can be delayed for three to six months), and cosmetic, which can be indefinitely postponed. [Chief Medical Officer Dr. David] Battinelli said urgent could include things like cancer biopsies, while knee replacements might fall into the planned category.”

The reasons for this are sound: health systems want to free up staff, protective equipment, and hospital beds to deal with an influx of COVID-19 cases. Health providers need to save medical masks, intubation equipment, and a surgical recovery room for COVID-19 patients. However, it leaves non-coronavirus patients in limbo. 

Additionally, these types of procedures are the bread and butter of a large health system when it comes to revenue. While it’s difficult to calculate a nationwide number on the lost revenue due to elective procedures, we do know that United Healthcare has fast-tracked $2 billion in payments to hospitals to help them weather the financial storm. There are clearing skies on the horizon for elective procedures, as numerous industry groups have released guidelines for hospitals to once again start surgeries for non-COVID-19 patients. However, once these procedures start again, we’ll likely see a big backlog of surgeries and frustrated patients who will have to wait in long lines to receive care.

Investment portfolio losses. 

Just like many Americans, hospital systems have investment funds. With the stock market losses, they are feeling the pinch in lost capital. It comes at a time when they are more in need of liquidity (cash on hand) than ever before as they attempt to stock up on needed protective supplies and pricey medical equipment. An article in Healthcare Finance explains: 

“What that means is that hospitals, nonprofits especially, are burning through liquidity. That's likely to create some ripple effects.”

Hospitals have been spending their precious cash reserves on equipment for both doctors and patients, but many of them are stuck with an impossible decision: do they spend on pricey $25,000 to $50,000 ventilators in case a surge happens in their service area, or do they wait to see if they’re needed? According to one report from March, many hospitals cannot afford to invest in ventilators, especially if the COVID-19 pandemic turns out to be a short-term event. Some have disputed this claim, but the fact remains that many health systems are short on cash due to the volatility of the stock market. 

Uncompensated care. 

We wrote about the problem of uncompensated care, the services hospitals provide for the uninsured or underinsured, which is expected to reach $1.1 trillion in 2028. Hospitals do have strategies for mitigating the cost of uncompensated care, but during a serious health crisis like this one, they are focused on meeting demand and giving patients the best care possible. The problem of uncompensated care is just another factor that will strain the ability of healthcare providers to operate smoothly. 

One possible additional problem: since so many Americans get health insurance through their employers, the mounting job losses associated with the coronavirus pandemic will likely lead to a surge in people without adequate health insurance.

The good news is that the Department of Health and Human Services has agreed to subsidize uncompensated care using a $100 billion relief fund. While details are still emerging, the plan is to pay hospitals at Medicare rates for uninsured patients who are treated for COVID-19. This may not cover the total cost of treating the uninsured, but it will certainly help hospitals stay on their feet through the crisis. 

Rural healthcare strain. 

Large hospital groups in urban centers have been hit first by the coronavirus outbreak, but when COVID-19 comes to rural America, we’ll see additional consequences for healthcare providers. The Navajo Nation, the U.S.’s largest Native American Reservation, may provide an initial “case study” around the effects of COVID-19 on a rural population. It straddles the borders of Utah, Arizona, and New Mexico, and is home to just 350,000 people living in approximately 27,000 square miles (that’s a population density of about 13 people in each square mile). 

The Diné (the Navajo language name for tribal members) live dispersed throughout the desert, and many would ordinarily drive an hour or more to visit the grocery store, a health clinic, or a shopping center. Like many rural populations, they also experience high rates of heart disease, diabetes, and other chronic health conditions. While hospitals within the reservation are quickly converting facilities to treat coronavirus patients, experts fear it won’t be enough. As Business Insider reported, the Navajo Nation has just 170 hospital beds, 13 ICU beds, and just 28 ventilators. As of April 24th, the Nation has the third-highest per capita rate of COVID-19 infection, behind just New York and New Jersey. 

As alarming as the numbers are, there are some bright spots for the Diné. The Salt Lake Tribune reported that testing is rolling out at about 4x the rate of neighboring Arizona. The per capita testing once again puts the Navajo Nation third in the country, this time behind New York and Louisiana. They are also adopting an aggressive contact tracing strategy to help isolate those who are infected and prevent the spread. Like other rural areas around the country, the Navajo have converted hotel rooms to quarantine housing, sent volunteers into the community to promote handwashing and the wearing of masks, sought emergency funding from both nonprofit sources and the federal government, and even implemented curfews for residents. 

These measures are all being watched by other rural communities and healthcare providers for lessons they may be able to learn and tools they might want to implement as the coronavirus reaches more remote areas of the country.

However, many rural hospitals were already on the brink of closure before the pandemic, and the cancellation of elective surgeries has pushed them over the edge. Unless these healthcare providers are located in an area with surging COVID-19 cases (like the Navajo Nation or Blaine County, Idaho), many of them are unable to keep their doors open. In 2019, nineteen rural hospitals closed in the U.S., more than any in previous years. If this trend continues, the COVID-19 pandemic will leave an elderly, high-risk population without access to nearby health services. 

These are just a few examples of how coronavirus is impacting the way healthcare providers operate. While we love seeing videos of New Yorkers applauding frontline healthcare workers and are saddened to see them sickened by the virus, there are many consequences for hospitals beyond the impacts on doctors and nurses. Benefits professionals may find themselves with new network partners, innovative Centers of Excellence agreements, and reworked direct contracting relationships in the next few years. We’ll continue following the impacts of COVID-19 on healthcare and benefits as these stories progress. In the meantime, if you’d like to learn more about how benefits data will play a part in the pandemic, visit our COVID-19 Resource Center

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