COVID-19 could be a double whammy for hospitals' finances in that they're putting off high-margin surgeries to treat expensive, complex coronavirus patients with no way to predict reimbursement.
"It probably will be significant in most cases," Chip Kahn, CEO of the Federation of American Hospitals, said of the novel coronavirus' financial impact on hospitals. "In some situations, if we're taking about two or three months of this … you could see many hospitals with their backs to the wall."
Prominent hospitals like New York-Presbyterian and Brigham and Women's in Boston as well as massive health systems like Northwell Health have said they are canceling or postponing elective procedures in the coming weeks. It may be necessary in many cases to prevent a more deadly COVID-19 outbreak, but could shrink an important revenue source for providers.
Treating COVID-19 patients is expensive and unpredictable in terms of the resources required, said Kahn, whose organization represents for-profit hospital companies. He questioned whether hospitals will see adequate reimbursement from treating those patients, as some may be homeless, unable to self-isolate or uninsured. He questioned whether hospitals' Medicare payments would offset the cost of providing treatment.
The procedure cancellations align with the U.S. surgeon general's recommendation that hospitals stop performing elective procedures to prevent the spread of the novel coronavirus and preserve capacity in hospital intensive-care units as well as equipment and staff.
The American Hospital Association, FAH and other groups are asking the surgeon general to clarify his directive to account for the fact that some so-called elective procedures can't be delayed, such as cancer surgeries.
"If you have a faulty heart valve, if you have some other problem that's really quite urgent to take care of, we don't want to cancel those," said Nancy Foster, the AHA's vice president of quality and patient safety policy. "A tummy tuck, that can be pushed off for a while."
Similarly, Kahn said the directive needs clarification.
"Any blanket postponement, it's dangerous," he said. "It's not just inappropriate."
Allegheny Health Network, an integrated health system in Pittsburgh, would never call off all of its scheduled procedures, CEO Cynthia Hundorfean said.
"In clinical medicine, you wouldn't think about it that way," she said.
That said, most procedures that aren't considered urgent are being pushed back eight to 10 weeks, Hundorfean said.
Any time there is disruption in scheduled procedures, there is a financial impact, said David Holmberg, the CEO of Highmark Health, the insurance arm of Allegheny Health Network.
"We're not real concerned about the economics of this right now," he said. "We're focused on patient safety."
Surgical procedures tend to be hospitals' profit drivers because providers get paid more for these cases compared with medical cases, such as a COVID-19 patient, said Kevin Holloran, a senior director with Fitch Ratings. But Holloran predicts only a "muted impact" of the canceled procedures, since they're really just being pushed back a few months.
"It's a delay of those services, which will come back to you," he said.
Holloran also said he predicts most COVID-19 patients will be insured through commercial plans and Medicare, since those who are hospitalized have skewed older.
Paul Hughes-Cromwick, co-director of sustainable health spending strategies with the research and consulting organization Altarum, predicts this will need to end in some sort of financial bailout for hospitals similar to the Troubled Asset Relief Program, a $700 billion government bailout in 2008. How much will depend on the outbreak's severity.
COVID-19 patients may be very expensive to treat and may or may not have private insurance. At the same time, canceling profitable procedures presents a "double whammy," Hughes-Cromwick said.
"That is the game when you're running a hospital," he said. "You survive because of your high margin services that you can counter against your low margin ones."
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