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April 24, 2020 05:30 PM

COVID-19 could cause $650 billion in direct medical costs

Michael Brady
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    Modern Healthcare Illustration / Getty Images

    Researchers estimate there will be $163 to $654 billion in direct medical costs caused by the COVID-19 pandemic, according to a new study.

    If 80% of the U.S. population comes down with COVID-19, it will create $654 billion in direct costs resulting from almost 45 million hospitalizations, 6.5 million ventilators in-use and nearly 250 million hospital bed days, Health Affairs found.

    But if 20% of the population develops COVID-19, the virus would bring about $163 billion in direct costs thanks to just over 11 million hospitalizations, 1.6 million ventilators used and more than 62 million hospital bed days.

    "The significant difference in costs by attack rate across the U.S. population show the value of strategies that keep the attack as low as possible and, conversely, the potential cost of any 'herd immunity' strategies that allow people to get infected," wrote the research team from the City University of New York and UCLA Medical Center.

    The researchers found that an attack rate of 50% would lead to nearly $410 billion in direct costs, and that treatment would cost more than $3,000 for each person showing symptoms of the virus. That's about four times the average cost of a symptomatic influenza case.

    "Our results show that, even when only considering the costs during the acute infection and not the costs of follow-up care after the infection, the direct medical costs of a symptomatic COVID-19 case tend to be substantially higher than other common infectious diseases," according to the authors.

    Most of the additional costs associated with COVID-19 result from high rates of hospitalization and mortality compared to the seasonal flu. There could be extra costs for patients that develop acute respiratory distress syndrome—ARDS—or other complications like sepsis.

    All the uncertainty surrounding the pandemic means that hospitals need to take a multi-pronged approach to make sure that they're financially prepared to deal with costs of COVID-19, said Rick Gundling, senior vice president of healthcare financial practices for the Healthcare Financial Management Association.

    But health systems should make sure that they're taking care of their immediate needs before preparing for what comes next, Gundling said. That includes applying for any state or federal aid they qualify for, such as provider relief funds under the CARES Act, working with state and local officials to restart elective procedures when possible and working with capital markets and banks to establish credit lines.

    "You have to make sure you stay liquid to make it through this uncertainty," Gundling said.

    Once their immediate needs are addressed, health systems should start recapturing lost revenues by increasing their use of telehealth for primary care and other visits. Many people will still be reluctant to visit a healthcare facility, even after the crisis begins to subside.

    "It's a sort of post-traumatic stress disorder," Gundling said. "Fear starts setting in."

    Providers also need to develop contingency plans for increasing surge capacity, which could include redesigning hospital space to make it more flexible so that it can be used as a hospital bed or an intensive care unit.

    "Did I have the surge capacity? Was I able to flex up? Did I have the supply chain in place? Was I ready with staff, or am I having to pay tons over time?" Gundling said. Those are the sorts of questions that executives should be asking themselves.

    But balancing the financial imperatives of the present with the need to prepare for an uptick in COVID-19 cases can be challenging.

    "In my role as CFO, there are times . . . where what I'm trying to do are almost diametrically opposed," said Daniel J. Kindron, CFO of Sharp Grossmont Hospital in La Mesa, California. "I'm trying to reduce costs and continue to provide care without breaking the bank, but we've had to prepare for what a surge might look like."

    For instance, Sharp Grossmont Hospital recently boosted its capacity by 40%, even as its typical revenue streams dry up.

    "We've had to figure out how to get all of the equipment (and beds) we need so we're accelerating capital requests to get monitors and different things in the hospital that we may not have had, including ventilators," Kindron said.

    Public health officials, consultants and researchers have produced several estimates of COVID'19's infection, mortality and hospitalization rates since the pandemic began. But a lack of testing, contact tracing and other information has made it difficult for experts to pinpoint who will be infected and how the virus will affect them. Some studies have been pre-published with preliminary findings, only to be brushed back by experts for using questionable methods or having computational errors.

    The virus' differing regional impacts have stumped experts worldwide as they try to learn about the disease on-the-fly. Unlike earlier pandemics such as Ebola, public health officials don't have a library of existing research to fall back on since nobody knew about COVID-19 before the outbreak. They're instead relying on knowledge of similar viruses to guide their decisions, which makes it difficult to know how to respond to COVID-19.

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