Effects of COVID-19 on the Healthcare Industry

Posted by Mirsa Sanxhaku on

COVID-19 has taken a toll on our lives, our economies, and our abilities to live freely. The lives we knew pre-COVID-19 seem like a thing of the past. Now, we wait and continue to hope for a time that we can someday, hopefully soon, call “post-COVID-19.” During these unprecedented circumstances we must be diligently mindful that the burden we carry as we practice social-distancing falls short compared to the burden that is weighing so heavily on our healthcare workers. They are the heroes that are risking their lives to move us forward.

The financial ramifications of the pandemic on our healthcare systems are also staggering. As more and more hospitals find themselves at full capacity across the country, an alarming number are having to furlough or permanently lay off their employees due to financial struggles.

 On April 7, 2020 Becker’s Hospital Review published a list of hospitals across the country that are having to make such changes. (Becker’s Hospital Review continues to add to this list as more information becomes available, so make sure to check back for updates.)

It would seem counterintuitive that hospitals are facing financial burdens while still operating at capacity, but many are. A major issue for healthcare systems across the country is that they have had to cut back on a great revenue source: elective procedures. The decision to postpone elective and nonemergent procedures guarantees that hospitals will have more beds for COVID-19 infected patients, that precious supplies and personal protective equipment (PPE) will be redirected to those serving in the frontlines, and that patients are not exposed to unnecessary risk. However, these procedures are highly profitable, and for many hospitals, their main source of revenue. Deferment and cancelation of such cases is beginning to take a toll on the financial stability of many hospitals- leading them to cut costs quickly.

These financial pressures are further exacerbated not only by the increased costs of providing medical attention to infected individuals, but also by the fact that, until recently, reimbursement premiums had not been adjusted to account for the higher costs in care. A report published by Strata Decision Technology on March 24, 2020 explains that 97% of hospitals across the country could be expected to lose an average of $2,800 on every COVID-19 case, with many losing $8,000 to $10,000 per case.

While the CARES Act that was signed into law on March 27, 2020 by President Trump increased Medicare reimbursement for COVID-19 patients by 20%, researchers at Strata Decision Technology estimate that the offset in the cost that hospitals will incur is only partial. They predict the average loss per case to drop down to $1,200, with some hospital systems losing upwards of $6,000 to $8,000.

CARES Act also included a $100 billion fund to help hospitals during this time, that although helpful to healthcare systems, may not be enough to curb the loss: “While the $100 billion provides some compensation, it will likely be insufficient to fully cover this lost revenue, particularly if the outbreak is sustained over a long period, and elective and other nonessential care remains suspended into late spring or summer” – Moody’s Investors Service.


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