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March 26, 2020 04:32 PM

NYC, NJ hospital leaders brace for 'enormous' hits to revenue

Tara Bannow
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    Modern Healthcare Illustration / Getty Images

    Running out of ventilators has been a major topic of discussion among New York City hospital leaders, but one executive said that's not his biggest fear in the COVID-19 pandemic.

    "Our number one concern is staff," said an executive from a New York acute hospital. "We can have all the ventilators in the world, but we don't have enough respiratory therapists. They're in short supply."

    The executive spoke on a call with analysts from the investment bank Jefferies to share an update on his hospital's experience so far navigating the novel coronavirus pandemic. Jefferies asked that the hospital executives be quoted anonymously because of client privilege.

    Another executive from a hospital in New Jersey agreed on the call that respiratory therapists are in short supply. But that's not all.

    "But even our housekeeping and environmental services staff is getting sick and they've taken a big hit," he said.

    New York state on Friday reported 44,635 positive COVID-19 tests and more than 500 deaths, according to the health department. New Jersey reported reported more than 8,000 cases and more than 100 deaths.

    It's impossible to know at this stage how hospitals will fare financially, but many administrators say they're preparing to take significant hits to their bottom lines.

    The New York hospital has so far only gotten payment from a few of its COVID-19 patients, the executive said. COVID-19 poses a financial challenge for hospitals because the patients are expensive to treat—requiring isolation, personal protective equipment and at least a 10-day intensive care unit stay, he added. And most of the patients are covered by Medicare, which typically doesn't reimburse well, he said.

    "They're not a good situation for the hospitals," he said.

    The New Jersey executive agreed, saying his COVID-19 patients are mostly Medicare.

    "The revenue hit is going to be enormous," he said.

    The call participants did not mention the fact that the new COVID-19 economic stimulus deal includes a 20% Medicare reimbursement bump for inpatient COVID-19 patients.

    Adding to that pain is putting off elective procedures to save capacity for COVID-19 patients. The New York executive said his hospital's elective procedures are down 40%, which is especially hard because surgeries carry higher reimbursement than other services.

    "They tend to be your higher revenue cases so they have a disproportionate effect on revenue," he said.

    A Jefferies analyst commented that 40% seems low, given other health systems have reported elective procedures dropping by up to 90%. The New York executive explained his hospital takes lots of trauma patients, including hip replacements necessitated by trauma. He said it could also be because the hospital categorizes more procedures as elective than others do.

    "When healthcare in the state is running on a 1% margin or less, 40% to me is catastrophic," he said.

    In New Jersey, electives are down roughly 70%, the executive said.

    As far as the surgeries being rescheduled, the New York executive estimates the hospital will lose at least 15% to alternative providers like surgery centers if patients don't want to wait until mid-May.

    People with high-deductible health plans who are now faced with unemployment may even defer the elective procedures longer because they can't afford a $600 co-pay, he added.

    The New York hospital operates five freestanding imaging centers through a joint venture, and procedures are down 80%. Rather than laying off the staff, the hospital has put them on a 50% pay schedule, the executive said.

    Both executives agreed that they have repurposed other areas of their hospitals into COVID-19 treatment areas. At the New York hospital that's happened with a transitional care unit and an administrative office. The New Jersey hospital has converted its pediatrics unit and a post-surgical recovery, among others.

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