COVID-19 Costs American Healthcare System $200 Billion In Four Months

05/10/2020
Personal protective equipment

According to a new report published earlier this month by the American Hospital Association (AHA), hospitals and healthcare systems are facing unprecedented financial pressures and losses due to the current COVID-19 pandemic. The report predicts that American healthcare systems will lose $200 billion within the first four months of the pandemic, ranging from March to June.

The AHA stated that the losses are connected to the costs of treating COVID-19 patients, buying additional supplies and https://oisto.com/Printer-pape..., and supporting frontline healthcare workers. Approximately $161 billion in losses are directly due to canceled surgeries and other services due to COVID-19, such as ER visits and outpatient care services.

The AHA stated that they are citing these figures in their bid for more money from Congress. To date, the healthcare industry has received approximately $175 billion in funding due to several rescue bills, such as the Coronavirus Aid, Relief, and Economic Security Act. However, many hospitals are already operating on thin margins and may not survive unless they get additional help from the federal government.

The COVID-19 pandemic has placed an enormous strain on every area of the healthcare system. Hospitals have been hit the hardest. They have lost billions of dollars in revenue due to canceled procedures. This is coupled with the additional money they have to spend on treating COVID-19 patients and buying additional supplies. Most COVID-19 patients are spending longer than usual in intensive care units, and this strain can be felt throughout the entire system.

 

The AHA has been pushing for more financial help beyond the initial $175 it has received. However, as the Senate is in session but the House is not, there does not appear to be more money coming anytime soon. The AHA cited that American healthcare systems will lose $202.6 billion within four months, which averages more than $50 billion per month due to COVID-19 related losses. This information is according to the group’s hospital finance internal databases.

For treatment costs, the group pulled information from the Kaiser Family Foundation and FAIR Health as well as the Society for Healthcare Organization Procurement Professionals to address the cost of personal protective equipment. The AHA also noted that inpatient and outpatient adjusted discharges are down 13% from one year ago, despite the normal steady increases that healthcare centers normally see each year.

Major supply chains, including HCA, Tenet, and Community Health Systems, confirmed these numbers in their quarterly earning reports. However, they indicated that elective surgeries and other procedures may start up soon due to physician lobbies, such as those from the American College of Cardiology.

The report also indicated that other factors were adding to the debt, such as managing the current drug shortage, buying new medical equipment, such as respirators, increased labor costs, and costs that are related to reconfiguring hospital spaces to make room for COVID-19 patients.

However, the AHA did not state what it needed to keep American healthcare systems running smoothly in the future, including more funding. It stated that the number of uninsured people could reach 40 million in America, which is close to pre-Affordable Care Act numbers. This could lead to more write-offs and charity help.

COVID-19 Depletes Hospital Revenues

The report indicated that our healthcare system has stepped up in a heroic way to meet the challenges of COVID-19, which has affected more than one million Americans. Their goal is to increase testing efforts and treat patients to save lives and minimize the spread of the virus. This includes manufacturing testing tents, adding general and intensive care unit beds, and coming up with COVID-19 units to treat and isolate patients while keeping staff healthy. These challenges created a financial burden on America’s healthcare systems as hospitals cancel non-emergency procedures and people are avoiding care to stop the spread of the virus.

COVID-19 treatment has also put an increased demand on medical supplies and equipment. Many hospitals face increasing costs for this equipment. Additionally, many people have lost their jobs due to the pandemic, leaving many people uninsured. Some hospitals that are located in hotspots are trying to support doctors and medical staff by offering housing, childcare, and transportation. All of these factors are leading to catastrophic financial challenges for hospitals.

The AHA looked at four analyses to narrow down these financial challenges, including the following areas:

  • The effect of canceled procedures caused by COVID-19 and its impact on hospital revenue
  • The impact of COVID-19 hospital stays
  • Additional costs linked to the buying of PPE or personal protective equipment
  • The costs of extra support that some hospitals are giving their staff

The report analyzes the short-term effects of these factors, which are limited to a four-month period ranging from March 1, 2020 to June 30, 2020. The total estimated loss from these four months is $202.6 billion or an average of $50.7 billion per month. The report goes on to state that even though the federal government was initially quick to provide financial help, more is needed. This is because many hospitals were already facing financial burdens before the pandemic began.

Health experts are concerned about law payment rates from the government, which led to the Congressional Budget Office to estimate that between 40% and 50% of hospitals could have negative margins by 2025 even before the pandemic started. The AHA pleads that hospitals and healthcare systems need more money to help get America back on its feet and save lives.

Healthcare Systems Face Devastating Numbers

As of April 28, 2020, there are over one million cases of COVID-19 in the United States. Since the end of February, nearly 30 million Americans have filed for unemployment insurance. According to the St. Louis Federal Reserve, this number could increase to 47 million by the end of 2020’s second quarter. The United States Department of Commerce stated on April 29 that the first quarter gross domestic product contracted by 4.8%, which shows the pandemic’s effect on the American economy. These numbers have devastated hospitals and healthcare systems.


The loss in revenue that hospitals are facing is expected to rise. The Centers for Disease Control and Prevention estimated that the collective hospitalization rate of COVID-19 patients will be 29.2 per 100,000 people. These projects are even higher for Medicare-aged people (95.5 per 100,000) as well as adults between the ages of 50 and 64 (47.2 per 100,000). Additionally, hospital workers are concerned that many patients with chronic diseases are forgoing treatment.

According to the Kaiser Family Foundation, the cost of treating a patient with COVID-19 could be more than $20,000. Additionally, over $88,000 is required to treat patients with ventilators. A study conducted by FAIR Health estimated that the average cost of treating patients with coverage will be $38,221. These numbers may change as more Americans lose their job and the healthcare system is further taxed.

These estimates do NOT take into account the additional costs of getting medical supplies, equipment, and drugs to hospitals to meet increased demands. The prices for these items have increased since the beginning of the pandemic, and hospitals cannot afford these new prices. For example, The Society for Healthcare Organization Procurement Professionals (SHOPP) estimated that there is a tenfold increase in many medical supplies since the beginning of the pandemic. In New York, hospitals have reported paying four times as much for medical gloves and 15 times the amount for masks. These numbers don’t even account for extra labor costs.

The shortages can be broken down into the following categories:

  • Drug shortage costs: Hospitals expend an estimated $400 million per year coping with ongoing drug shortages. The pandemic has caused lower than normal drug supply due to the increasing demand of COVID-19 related drugs. This has created a drug shortage for many vital drugs, which results in higher costs for hospitals. 
  • Wage and labor costs: Wages and salary costs have increased during the pandemic. Hospitals are dealing with overtime costs while many frontline workers become sick. Some locations have extended bonus pay for workers due to the increased demand for their services. Costs of the pandemic are not evenly distributed throughout the United States and no data is yet available to analyze the magnitude of these effects.
  • Non-PPE medical supplies and equipment costs: Hospitals are facing increased costs for non-PPE medical supplies, such as ventilators. Limited data is available to understand the burden of these costs. However, it is clear that more support is needed to help hospitals face this additional cost.
  • Capital costs: Many hospital services have increased during the pandemic, which has resulted in the need for additional space for COVID-19 spaces, beds, and other treatments.

Although the guide did not specify the type of help hospitals need, ongoing financial support is much needed to navigate the pandemic, get America back on its feet, and save as many lives as possible.