The Financial Challenges of COVID-19 on Hospitals and Health Systems
The COVID-19 pandemic has changed our world. For hospitals and health systems this meant canceling non-emergent surgeries and other services – many of which are often for care that is potentially life-saving, necessary to alleviate pain and suffering, or to restore individuals to full health. At the same time, for some hospitals and health systems it accounts for up to 75% of their revenues necessary to cover the costs of employee salaries and the operation of facilities and technologies necessary to ensure they are always there, ready to care. And, of course, physicians and other health professionals face similar challenges. This has never happened in our history, and the financial strain it has created has put enormous pressures on all hospitals, which could force some to ultimately close their doors.
The New York Times ran a story this week highlighting hospital systems that received funds from the CARES Act, failing to mention the financial devastation that all hospitals have experienced. Every hospital in America prepared for — and many are caring for — COVID-19 patients. From the start of the pandemic, we asked Congress and the Administration for the financial support hospitals on the front lines desperately need to fight this battle. The article failed to capture the “triple whammy” hit related to COVID-19 that all hospitals face that is contributing to an unprecedented financial crisis for hospitals and health systems. These include: skyrocketing costs of preparing for a surge of COVID-19 patients; a forced shutdown of regular operations for non-emergent procedures; and treating a growing number of uninsured patients.
And while $54 billion in relief funds have been sent to hospitals, the government assistance won't make up for the catastrophic financial losses created by COVID-19. Just this week, HHS announced the distribution of an additional $10 billion from the CARES Act emergency relief fund to hospitals serving high numbers of Medicaid and uninsured patients. These hospitals care for our nation’s most vulnerable patients and communities, which have suffered disproportionately from the pandemic. The financial situation for many of these hospitals before COVID-19 was bleak, with a number of them operating in the red. The economic challenges created by COVID-19 has forced hospital leaders to make tough decisions, like furloughing staff.
Even before the pandemic the financial state of many hospitals was very fragile. The Congressional Budget Office predicted that between 40-50% of hospitals could have negative margins by 2025. The pandemic has further exacerbated an already precarious situation. An analysis by Kaufman Hall showed that April 2020 was the worst month in the history for America’s hospitals and health systems in terms of operating margins.
The AHA’s own report found that hospitals and health systems are projected to lose more than $200 billion between March 1 and June 30 due to this pandemic. Last month, Moody’s Investors Service found that “nonprofit hospitals should expect to see the financial effects of the pandemic into next year and assistance from the federal government is unlikely to fully compensate them.” And most experts agree that recovery will be slow. In a Kaiser Family Foundation survey, more than one quarter (26%) of individuals reported that they would wait four months or longer to seek previously skipped care.
Our patients, communities and the entire country is depending on hospitals remaining resilient, particularly given that more “hot spots” are emerging and that a reoccurrence may be on the horizon. As Dr. Anthony Fauci has said, “A second wave of coronavirus is inevitable.” Truth is: ensuring hospitals remain strong is a matter of national security. In order to do that, hospitals will need further support and resources to ensure that we can continue to deliver the critical care that our patients and communities depend on – while also ensuring that we are prepared for the continuing challenges we face from this pandemic, as well as other potential emergencies.