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Hospitals that are already financially strapped are bracing for even more strain if the coronavirus outbreak gains further momentum in the U.S.
It sounds counterintuitive, but a full intensive-care unit can negatively affect a hospital's finances because the units are expensive to operate and patients have varying levels of insurance coverage, experts say. Many hospital ICUs are already crowded with influenza patients. Adding COVID-19 patients into the mix could challenge some providers.
"The reason ICUs have as many beds as they have isn't because they're a margin-maker, it's because they provide that community benefit," said Matt Wolf, director and healthcare senior analyst at RSM.
ICU patients are inherently complex cases, so many require expensive drugs, such as intravenous bags that cost $20,000 or more, Wolf said. They can require short-notice surgeries or resources from other areas of the hospital. It's also difficult for hospitals to predict the volumes and economics of the patients who enter their ICUs, including whether they'll have commercial insurance, government plans that pay below the cost of providing care or no insurance.
"Right now when you're putting a patient in your most costly setting and you're going to be paid below it, that puts a strain," said Rick Gundling, a vice president at the Healthcare Financial Management Association.
A Trump administration official recently touted the possibility of using federal disaster funds to help hospitals treat uninsured coronavirus patients, according to the HFMA. National Disaster Medical System payments reimburse for services at 110% of Medicare rates.
Gundling said the "likelihood is very good" that the federal government will route some of that funding to hospitals to help with the cost of treating COVID-19 patients.
That comes as many hospitals are spending more on supplies like masks, gloves, lab equipment, gowns and drugs. Staffing costs could rise, too, if hospitals are forced to call in temporary workers.
A widespread outbreak would also likely cause patients to postpone elective surgeries like hip or knee replacements, which also tend to be hospitals' profit centers. Wolf said RSM is advising some of its clients to proactively reschedule certain surgeries if the outbreak gets worse.
"We're preaching preparedness," he said.
Brian Tanquilut, a healthcare equity analyst with Jefferies, said he's not seeing elective procedures being delayed or canceled just yet, although it may happen in the future. He is seeing primary-care visits being canceled, however. A widespread outbreak could also prompt shortages in supplies and drugs, but Tanquilut said he doesn't think providers need to worry about that for a few quarters.
A widespread outbreak in the U.S. would likely strain academic medical centers more so than for-profit hospital operators, as most COVID-19 cases will likely be sent to the former, Tanquilut said.
"A typical HCA hospital will not have an infectious-disease department because it's not their bread and butter," he said. "Infectious-disease departments are mostly in academic hospitals."
Nashville-based HCA Healthcare did not return a request for comment.
Stocks took a major plunge on Monday amid dropping oil prices and coronavirus fears, prompting a brief halt to trading in the morning.
For-profit hospital operators were even more impacted than the market overall. Franklin, Tenn.-based Community Health Systems' share price plummeted 20.7% by market close, while Dallas-based Tenet Healthcare Corp. fell 15.3% and HCA dropped 8.3%. Meanwhile, the Dow Jones Industrial Average fell 7.7% as of market close and the S&P 500 fell 7.6%. CHS and Tenet did not respond immediately for comment.
Market movements tend to be more pronounced for companies with high debt levels, which is why the for-profit hospital chains fared worse on Monday, Tanquilut said.
CHS' debt to earnings before interest, taxes, depreciation and amortization ratio is 11.7, Tenet's is 5.4 and HCA's is 3.4. Debt to total asset ratios, respectively, were 89.9, 67.5 and 78.9, according to MarketWatch.
The coronavirus outbreak will continue to affect the stock market so long as people continue to avoid traveling, manufacturing plants are shut down and economic activity is slowed, Tanquilut said.
