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Hospitals Face Unprecedented Losses Due to the COVID-19 Pandemic

By: Andrew Silverio, Esq.

As the days in isolation continue to stretch into weeks and eventually months, it seems there is no industry or business that has not been impacted by the COVID-19 pandemic.  But a recent report released by the American Hospital Association (available at https://www.aha.org/guidesreports/2020-05-05-hospitals-and-health-systems-face-unprecedented-financial-pressures-due) reveals a significant financial impact on hospitals and health systems, entities which are truly on the front lines of the fight against COVID-19.  This may seem counterintuitive – one might expect that a massive public health event like a viral pandemic would result in an influx of business and corresponding increase in revenues for hospitals and other providers.  However, the report outlines various ways in which these providers are suffering significant losses – estimated at $202.6 billion over four months, or $50.7 billion per month.

First, many Americans sheltering in place and reluctant to risk exposure to the virus are canceling or postponing standard care, and shortages of protective equipment and crucial drugs have forced providers to incur increased cost to secure these materials.  Additionally, the sudden and historic surge of unemployment has led to a corresponding rise in uninsured patients.  Despite government efforts to expand access to COBRA coverage, these efforts have not impacted the cost of coverage itself, and it can still be prohibitively costly, especially for the newly unemployed.

The report itself provides a much more in-depth analysis of the impact of these factors, and I encourage reviewing it in full (with a grain of salt, as the AHA is ultimately an advocacy organization).  Taken at face value, it remains to be seen what the ultimate impact on payers will be.  Certainly some of this expense will be passed on to payers directly, for example increased supply costs for drugs and medical equipment, but more indirect and widespread impact is likely as well, for example if providers make concerted efforts to be more aggressive with billing and collections do to the increase in uninsured patients, or are forced out of operation, reducing healthcare options overall. For example, CNN outlines at https://www.cnn.com/2020/04/21/us/coronavirus-rural-hospitals-invs/index.html the disparate impact on rural hospitals, many of which are being forced to close down as the sudden and almost complete end of routine care is not accompanied by a corresponding surge in COVID-19 patients.  In communities with few healthcare options, the loss of a single hospital can be disastrous, with no competitive incentive remaining for the surviving providers to reasonably limit their charges or ensure the quality of care beyond what’s necessary to manage direct liability.