Hospitals facing financial hit as flu season continues to worsen

One of the most severe flu seasons over the past decade could result in financial strain rather than a revenue generator for healthcare providers as they see an influx of patients.

Widespread flu activity occurred in 49 states as of Jan. 20, according to the Centers for Disease Control and Prevention. And throughout the country, there have been reports of higher than normal rates of hospitalizations related to cases of the virus.

There were nearly 42 hospital admissions for every 100,000 people in the U.S. at the end of the third week of 2018, according to the most recent CDC figures. That's more than double the rate from the past two flu seasons and is the second-highest in the past 10 seasons. As of late Friday afternoon, the flu had killed 53 children in the U.S. this season.

The surge has left many hospitals overwhelmed, forcing some to set up triage tents outside of emergency departments. Others have resorted to emergency protocols such as postponing elective surgeries and limiting the number of visitors. Such activity is likely to hurt the bottom line, even though volume is increasing.

"Medical admissions tend to reimburse at lower rates than surgical admissions," said Daniel Steingart, vice president and senior credit officer at Moody's Investors Service. He recently co-authored an investment note that found while increased volume usually results in a net positive for providers, having an increase of patients with lower-acuity ailments such as the flu often results in hospitals incurring a net loss for their treatment.

Steingart said minimizing the length of stay of low-acuity care patients is crucial toward managing expenses related to their treatment. But the severity of this year's flu season could lead to longer hospital stays.

The financial impact can depend heavily on the type of strain most predominant during a flu season. More than 11,000 lab-confirmed influenza-associated hospitalizations were reported from Oct. 1 to Jan. 20, according to the CDC; more than 88% of those cases involved the H3N2 strain. H3N2 tends to affect older adults, who are more likely than other age groups to have existing health conditions that complicate treatment and make it more expensive.

"This is the more difficult type of flu season," said Dr. John Segreti, an infectious disease specialist at Rush University Medical Center in Chicago.

Since 2009, Rush has conducted year-round planning for every flu season, which has helped mitigate its burden, Segreti said. Still, Rush has experienced increases in flu-related hospital admissions the past several weeks. Segreti was unclear as to the overall economic burden this year's season will put on Rush, but acknowledged caring for older patients is often more resource-intensive. "If they get sick, they tend to be in the hospital longer and more likely to be in the intensive-care unit," he said.

The CDC estimates 5% to 20% of the U.S. population gets the flu each year at a cost of $10.4 billion a year in direct medical expenses.

Steingart said the costs of treating flu patients often come from other challenges that go beyond reimbursement. A surge in such patients requires hospitals to increase overtime pay and can cause supply shortages. Another problem lies with the inefficiencies a surge in flu patients creates since many first visit the emergency department, creating longer wait times.

Surge capacity was discussed during a Senate health committee hearing last month, when Dr. Tom Inglesby, director of the Center for Health Security at the Johns Hopkins Bloomberg School of Public Health, told lawmakers that the nation's hospital system doesn't have the capacity to handle a large-scale flu epidemic. "They are simply not equipped for those larger events, and they are living too close to the margins with just-in-time inventories to be able to surge," Inglesby told lawmakers Jan. 23.