Health systems could lose up to $2,800 per coronavirus case, according to one estimate. But the larger impact will certainly come from lost revenue as a result of the cancellation of elective cases and the reduction in non-COVID patient activity seen by health care providers.
Many hospitals will have trouble meeting their cash requirements in the next few months. In March, Moody’s revised the 2020 outlook for hospitals from stable to negative. The American Hospital Association estimates losses for hospitals at $1 million a day. Specific numbers for these losses are difficult to obtain, but some institutions are now reporting their experience. Boston Medical Center is reporting losses of $5 million per week. Sarasota Memorial Health Care System reported a $16 million drop in revenue in March. Nursing homes and long-term care facilities have been particularly hit hard with coronavirus, and the financial impact will be significant.
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Even before the coronavirus outbreak reached the United States, many hospitals were already struggling financially. According to a recent analysis, hospitals saw a 21.3% decline in operating margins from 2018 to 2019. Many rural hospitals have been experiencing significant operating losses and will be particularly impacted by this crisis. Now, because of the coronavirus pandemic, hospitals around the country are losing unprecedented amounts of money, and many are beginning to lay off staff and defer essential expenditures that previously had been considered necessary. Boston Medical Center recently announced a furlough of about 700 employees. Trinity Health is furloughing at least 2,500 employees. For most organizations, the contributions they have been seeing in non-operating investment income will disappear.

In areas where the coronavirus is rampant, like New York City, New Jersey and New Orleans, hospitals have been overwhelmed with patients and have had to stop most non-COVID activity to respond to the urgent demands of infected patients. As a result, health care organizations are experiencing a significant reduction in revenue, while at the same time seeing increased staff and supply costs. They are also facing the likely possibility of an increase in uncompensated care as more people who have lost their jobs will be unable to pay. In addition, hospitals are not likely to see ongoing contributions from non-operating revenue, as their investment portfolios have been hurt as well.

The big unknown is how long this will last. Projections for the epidemiologic trajectory of the coronavirus are still uncertain, but it is reasonable to estimate that we should be prepared for a long period of operational reductions.

Even with this additional federal stimulus funding now on its way, government funding can’t be the only solution to the industry’s problems. Hospitals are going to have to look to do business differently, and many will have to re-forecast their budgets and make tough choices. Managed care companies that have been seeing reduced claims as a result of the delay and reduction of services will have to step in by providing additional financial help to providers. Medicaid programs too will need to contribute to reducing provider financial losses.

Once this public health crisis is over, getting the economy back on track will be essential, but bolstering our health care system will be just as critical. While saving our airlines and hospitality industry is important, we must not overlook the industry that will get us out of this crisis and future crises: the health care industry.

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