Hospitals Bear Brunt of Financial Fallout From COVID

This year, March brings with it a joyless anniversary. It's been a long, arduous 3 years since the onset of the pandemic that overwhelmed our nation's hospitals and health systems. And, as of February 1, 2023, it resulted in a staggering 1,106,824 deaths in the U.S.

When the federal government's Public Health Emergency for COVID-19 expires in mid-May, the country will enter a post-pandemic transition phase. What will this look like? Are we really out of the woods?

True, our healthcare system has come a long way in combatting the virus and in tackling the myriad logistical challenges. But the damage inflicted on population health persists and the fallout from COVID continues to exact a substantial financial toll on hospitals and healthcare facilities.

Findings of a status report published by the American Hospital Association underscore serious threats to the financial viability of hospitals in communities across the country. Compared with pre-pandemic levels:

• Profit margins were projected to be down 37%, with more than half of hospitals experiencing negative margins through 2022
• Already substantially elevated, expenses were projected to increase by the end of 2022 to $135 billion over 2021 levels
• Related challenges (e.g., staffing shortages, supply chain issues) have not abated

In Pennsylvania, we see similar patterns at a state level. The Pennsylvania Health Care Cost Containment Coalition (PHC4) recently issued the seventh in a series of reports on the effect of the COVID disaster emergency on the state's hospitals and healthcare facilities. Total COVID-related expenses and lost revenue reported by these entities from January 2020 through June 2022 was an astounding $7,872,048,091.

Total quarterly costs have varied over the period, with fluctuations most pronounced in staffing-related expenses and revenue losses. Data from the second quarter of 2022 showed COVID-related costs of $206,282,192, with staffing being the largest expense for the period ($91,472,568). Total revenue for the quarter across all facilities was $64,735,606.

Given these dismal reports, it is no surprise that some economists now view 2022 as the worst financial year for hospitals in decades. The convergence of ongoing financial fallout from the pandemic, the anticipated decrease in COVID-related government support, and pervasive economic uncertainty do not bode well for 2023.

Key among current concerns for hospitals and healthcare facilities are the various indirect repercussions of COVID that may further impact their profitability, for instance:

• Although the need for acute-stage care has diminished, a recent study revealed that COVID drives higher costs for patients within the first 5 months being diagnosed
• Millions of Americans are already coping with "long COVID" (generally defined as signs, symptoms, and conditions that continue or develop after initial COVID infection); the number of affected individuals is spiraling upward, and the clinical effects are likely to compound existing challenges (e.g., supply shortages, staffing issues)
• Many hospitals and health systems continue to deal with the sequelae of delayed care during the pandemic -- i.e., higher volumes of patients with cancer and chronic conditions being detected in more advanced stages

Clearly, hospitals and healthcare facilities will have to adapt to these ongoing challenges. While some speculate that this will entail cost-cutting and price increases (both of which run the risk of compromising patient access and quality of care), my hope is that they will instead seize the opportunity to try new strategies such as:

• Implementing value-based care models and principles that link cost management to improved health outcomes
• Instituting or expanding upon existing virtual visit/telemedicine programs
• Leveraging the enormous potential of technology and tools (e.g., clinical data analytics, workflow improvement, and population health management)

It seems evident to me that perhaps now all healthcare service providers might completely embrace the notion we put forth more than a decade ago: "No Outcome, No Income."

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