EDITOR’S NOTE: RACmonitor Publisher and Monitor Mondays program host Chuck Buck recently asked longtime national RACmonitor correspondent Mark Spivey to produce a feature article on the financial fallout from COVID-19. The pandemic turned much of what many thought about healthcare management on its head. But where do we go from here, now that the federal Public Health Emergency (PHE) has ended? Spivey asked three of RACmonitor’s most trusted contributors to weigh in, and their thoughts appear throughout this article.
As milestones go, this one was fairly anti-climactic.
The Chicago-based Kaufman Hall consulting group’s National Hospital Flash Report, compiled with input from more than 900 hospitals nationwide and issued on a monthly basis, regularly features a graph illustrating the providers’ composite operating margins. And for month after month after agonizing month, dating back to last year, the figure had remained solidly in the red (well, speaking strictly literally, blue).
But then, for March 2023, there it was: a 0.0-percent decline. An entirely absent downward-facing bar, succeeding others that ranged from -0.8 percent to -3.0 percent over the last year. At long last, at least for a month, the hospitals had broken even.
Was it a harbinger of better things to come? Or just a blip amid financial hardships that may actually worsen, with the recent end of the federal public health emergency (PHE)?
Only time will tell.
A Seismic Shift
The American Hospital Association (AHA) didn’t mince words when, in February, it labeled 2022 the “worst financial year since the start of the COVID-19 pandemic,” with higher labor expenses and lower patient volumes.
“While we have seen a stabilization in operating margins over the past several months, the trendline continues to show that hospitals will be in a tough spot financially for the foreseeable future,” AHA quoted Kaufman Hall Senior Vice President of Data Analytics Erik Swanson as saying. “With future COVID surges possible and challenging financial months ahead for hospitals, managing cash on hand will be critical to weathering the storm.”
Speakers on an AHA call held last September painted a picture no more appealing.
“The numbers are all going in the wrong direction, and I’m concerned we’re going to see more healthcare providers close as a result of the current financial reality, which will impact access to care,” said Jack Lynch, president and CEO of Main Line Health, a nonprofit health system serving the greater Philadelphia area. “In my 35 years as a healthcare leader, this is the most fragile I’ve ever seen the American healthcare system.”
Perhaps that shouldn’t come as much of a surprise, though, considering the devastatingly unique nature of a pandemic that killed more than 1.1 million Americans. Earlier this month, the Los Angeles Times published a report summary from a team of economists, public policy researchers, and other experts who collectively estimated that the overall economic toll of COVID-19 in the U.S. will reach $14 trillion by the end of 2023, making it by far the costliest disaster of any kind to affect the country in the 21st century – twice as impactful as the Great Recession, 20 times as impactful as 9/11, and 40 times as impactful as any other disaster in the last quarter-century.
And even that price tag was marginally smaller than previously estimated.
Still, however, as federal officials noted in announcing the end of the PHE, since January 2021, COVID-19 deaths have declined by 95 percent in the U.S., and hospitalizations are down more than 90 percent.
And while many hospitals are still reeling from financial ramifications, other types of providers are faring far better.
“I have actually not heard from a single physician who has experienced severe financial impacts (from the pandemic),” said longtime RACmonitor contributor Dr. Ronald Hirsch, Vice President of the Regulations and Education Group at R1 RCM Inc. Physician Advisory Solutions. “I do think many had a decrease in revenue and increase in costs, but they for the most part absorbed those costs as the cost of being there for their patients. Now, the psychological damage was real, with many having risked the health and safety of themselves and their family, and (the effects of) that will be long-lasting.”
H. Steven Moffic, MD, an award-winning author and RACmonitor’s resident expert on all things psychiatry, said that in some ways, his specialty has actually flourished during recent years.
“The rise in tele-psychiatry and the rise in mental health concerns made outpatient mental health clinicians more busy than ever, and they got paid reasonably well for it. No-shows dropped dramatically, and the outcomes looked more than satisfactory,” Moffic said. “What would have negative financial impact is if they can no longer do tele-psychiatry out of the state(s) they are licensed in. As far as inpatient psychiatry goes, that was just as filled up, though the pandemic precautions made that more stressful.”
Still, there are several issues affecting the vast majority of providers more or less equally.
“First, obviously, staffing. It is harder, and more expensive, to have the necessary staff,” said David M. Glaser, Esq., shareholder in Fredrikson & Byron’s Health Law Group. “The second issue is supply chain-related. Things are harder to get, and more expensive. In addition to the higher cost, it makes various logistics more challenging, and hence more expensive.”
Often lost amid discussions about COVID and its impacts are several issues that the healthcare industry was grappling with well before the pandemic began – all of which have since been exacerbated. A study of nearly 2,500 physicians, the results of which were published last year, found a record high of nearly 63 percent of them reporting at least one manifestation of burnout, for example. That has contributed to an estimated 100,000 nurses leaving the workforce over the last two years, with more than 600,000 more reporting an intent to leave by 2027, creating a dire national shortage. Then there are the more than 600 rural hospitals nationwide – about 30 percent of the total – that are reportedly at risk of closing in the near future.
“I wonder what percentage of rural hospitals that are closing are a) part of systems that are choosing to close them or b) in states that have refused free federal money. It is really frustrating to watch states cut off their nose (declining Medicaid expansion) to spite their face,” Glaser said. “I don’t believe that states with Medicaid expansion, and systems committed to a charitable mission, have had the same closings as states with for-profit hospitals and no Medicaid expansion. There is a very basic, but important, lesson there.”
Sadly, and somewhat ironically, the fashion in which some hospitals will choose to adjust will affect the most marginalized worst of all.
“I suspect many (providers) have already and will continue to reassess the amount of uncompensated care they provide,” Hirsch said. “Many may choose to stop taking emergency department care or accepting uninsured patients into their practice.”
A Search for Solutions
In the vein of news absolutely no one wants to hear, considering factors such as climate change, international travel, and a growing global population, the London-based disease forecasting company Airfinity’s latest risk modeling suggests that there is an uncomfortably high 27.5-percent chance that a pandemic at least as deadly as COVID-19 could arise by 2033.
“That’s a rather specific number for an event that cannot possibly be predicted,” Hirsch quipped. “But I think just as citizens expect the government to be there in the event of a hurricane, tornado, or wildfire, they should be willing to spend a bit more of our taxes to be prepared for another pandemic.”
And that’s not the only thing the government can do.
“They can try to set up some rules that will more fairly distribute reimbursement for clinicians, as the for-profit companies are in more control of healthcare and the systems clinicians work in,” Moffic said. “And of course, the current administration can quietly set up better preparation for a future epidemic right now, although there is the challenge of new leadership as Dr. Fauci retired and the head of the CDC resigned.”
“One effort would be to require state Medicaid plans to pay physicians at a rate that is much more equitable than the current payments made by most states,” Hirsch added. “In Illinois, Medicaid pays physician office and hospital visits at about 25 percent of Medicare rates.”
Just months into the pandemic, the New England Journal of Medicine published an opinion piece with an interesting question: “are U.S. hospitals still ‘recession-proof?’” Noting that healthcare jobs actually increased during the Great Recession, it went on to outline how, even back then, it was clear that this was different.
“Hospitals were never recession-proof,” Glaser said. “There have been down periods before, and there will be again.”
“It is ironic that most of the public and clinicians think that hospitals overcharge for much in order to increase profits,” Moffic added. “Perhaps some of this is a PR problem.”
There’s no time like the present to address it.
Mark Spivey is a national correspondent for RACmonitor and ICD10monitor who has been writing and editing material about the federal oversight of American healthcare for nearly 15 years. He can be reached at firstname.lastname@example.org.