Hospitals in the United States could lose more than $500 billion in 100 days during the coronavirus pandemic, according to former Veterans Affairs Secretary David Shulkin. While Congress has appropriated $175 billion in total stimulus funding to hospitals, he said even that amount will not be enough to close the fiscal gap hospitals are facing.
Without proper funding to offset major financial losses during the pandemic, the consequences to major hospitals could be dire. Large hospitals could begin to see their capabilities and care resources fade, warned Shulkin and others who have served at the helm of major hospitals.
It could also require hospitals to prioritize some departments and teams, such as oncology and critical care teams, over others considered less essential. Large clinics, known for developing cutting-edge care could see reduction in the scope of their research, particularly for research unrelated to the coronavirus.
Some major institutions have already begun pay cuts, furloughs, and layoffs of hospital staff, deepening a growing unemployment crisis, and leaving some former hospital workers without health insurance.
“There is no hospital in the country, I don’t think, that could survive a year of what’s happened in March and April,” said Jefferson Health CEO Dr. Stephen Klasko, who also serves as president of Thomas Jefferson University.
Within the health care industry, there is also concern that many local community hospitals, with far fewer resources than their much-larger counterparts could collapse altogether.
Dr. Michael R. Jaff, former president of the Newton-Wellesley Hospital outside Boston, said the possibility of community hospitals shutting down could leave some of the nation’s most vulnerable people — those already disproportionately affected by the pandemic — in limbo, without adequate health care available to them.
“The consequences to the health care system are literally apocalyptic,” Klasko said. “In Pennsylvania alone, there will be $9 billion worth of losses, and maybe 30 percent of that will come back.”
While Klasko, whose hospital is in Philadelphia, said the institution has not furloughed or laid off any of its 35,000 employees, it is likely losing $25 million each week.
One of the primary reasons for the fiscal shortfalls at many hospitals is the slowing rate or full suspension in some states of elective procedures — which in some cases include everything from knee replacements to liver transplants. For U.S. hospitals, elective procedures typically close the fiscal gap created by treating patients whose care comes at a higher cost — like coronavirus patients, who may remain in intensive care units for extended stays.
“You rely upon your highly profitable surgical cases that are with insured patients, especially commercially insured, and this is the exact kind of thing we’ve seen in this crisis. The biggest hit has been to those profitable services,” Shulkin said.
Approximately 97 percent of health systems are losing $2,800 per coronavirus patient, with many losing between $8,000 and $10,000, according to a study commissioned and performed by Strata Decision Technologies — a software firm focused on financial forecasting for hospitals and health care systems — in late March using data from the Centers for Disease Control and Prevention, as well as from Italy and China.
As states across the country begin to reopen and ease lockdown measures, only recently have those elective procedures begun to resume at some U.S. hospitals.
The Mayo Clinic in Rochester, Minnesota, is also feeling the fiscal pressure of the pandemic, Dr. Amy Williams, dean of practice, said.
“We took a hit, there’s no question about it,” she said. To prepare for a surge of coronavirus patients, Mayo Clinic suspended its elective procedures and limited its clinical capacity. According to Williams, if those measures remain in place through the fourth fiscal quarter, it would cost her clinic $3 billion in lost revenue alone.
A recent financial report released by the American Hospital Association finds that health care accounts for 18 percent of the U.S. gross domestic product, and that hospitals account for one-third of that figure — employing more than 7 million people. Back in mid-March, in a letter sent to Congress requesting stimulus funds, the AHA stated daily losses of $1 million for U.S. hospitals — but some hospitals have been losing much more than that.
“Some hospitals run on incredibly thin margins,” Jaff said, citing the example of forecasted heavy snow leading his hospital to stock up on food, plan for staff to be unable to leave and for the numbers of patients to dwindle, all of which affect revenue. “In Boston, three snow days could’ve wiped out our margin for the month.”
Other major hospitals around the country appear to be experiencing similar losses. As of March 31, Michigan’s Beaumont Health had a net income of negative $278.4 million, a decrease of $407.5 million year-over-year for the same time period. Temple University Hospital in Philadelphia is losing $40 million per month, and the Connecticut Hospital Association estimates hospitals in its state will lose $1.5 billion for the fiscal year.
“You rely upon your highly profitable surgical cases that are with insured patients, especially commercially insured, and this is the exact kind of thing we’ve seen in this crisis. The biggest hit has been to those profitable services,” Shulkin said.
In order to survive such losses, Jaff said federal and state governments will likely need to step in with funding, and many smaller hospitals may need to be saved by larger institutions looking to acquire or merge with them. He also said one other critical issue is the speed with which elective cases are able to resume.
“Not only is it the willingness of patients to come back … is their fear of getting a COVID infection outweighed by their desire to do the planning for their elective surgery?” he said. “Secondly, does the hospital have the staffing to perform the surgery? Hospitals are running full tilt managing these very complex COVID cases … People are getting exhausted. The frontline health care workers, are they going to need a break before they resume a full schedule of pent-up elective case demand?”
Meanwhile, there’s “the cost to society” to consider, as well, Klasko said, as other health issues go unattended while elective procedures remain largely suspended. With less people coming in for colonoscopies, for example, there are likely going to be higher rates of colorectal cancer, he said.
“There are really two crises that were brought out by the pandemic: One is the pandemic, but the second is this inequity of health care that’s led to more underserved folks having obesity, diabetes, hypertension, and those people ended up dying at a much greater level than people that didn’t have those things — and those people tend to be underinsured, and those people tend to be in minority communities,” Klasko said. ”What the pandemic did in my mind is just basically, in one single fell swoop, bare what’s wrong with our health care system.”
