Counting the Cost

A recent AHA report assessed the financial impact of COVID-19 on the nation’s hospitals
and health systems

Fighting COVID-19 has taken a toll on the nation’s hospitals, especially financially, according to a report released in May by the American Hospital Association (AHA). In the report, the AHA estimated that the financial impact to hospitals and health systems from COVID-19 expenses and revenue losses over the four-month period from March 1 and June 30 totals $202.6 billion, with losses averaging over $50.7 billion per month.

The estimate includes the costs of COVID-19 hospitalizations, canceled and foregone services, purchasing needed personal protective equipment and providing additional support to hospital workers.

America’s hospitals and health systems have stepped up in heroic and unprecedented ways to meet the challenges caused by COVID-19,” said AHA President and CEO Rick Pollack. “However, the fight against this virus has created the greatest financial crisis in history for hospitals and health systems. While we appreciate the support and resources from Congress and the Administration, many hospitals are still on the brink. We need further support and resources to ensure that we can continue to deliver the critical care that our patients and communities are depending on while also ensuring that we are prepared for the continuing challenges we face from this pandemic as well as other potential emergencies.”

These challenges have created historic financial pressures for America’s hospitals and health systems, according to the AHA. Hospitals have canceled non-emergency procedures, and many Americans are postponing care as they shelter in place to stop the spread of the virus.

“Treatment for COVID-19 has created incredible demand for certain medical equipment and supplies as the virus has disrupted supply chains, increasing the costs that hospitals face to treat COVID-19 patients,” the AHA said. “At the same time, COVID-19 has led to unprecedented job losses, giving way to a rise in the number of uninsured. And while doctors, nurses, and other healthcare workers have met the COVID-19 challenge with heroic efforts, many hospitals and health systems, especially those located in hotspot areas of the pandemic, are supporting them by providing essentials like child care, transportation, and in some cases, housing.”

The following are findings of the AHA report.

Net financial impact of COVID-19 hospitalizations

The AHA estimates the net financial impact of COVID-19 hospitalizations over a four-month period will be $36.6 billion. “In other words, the nation’s hospitals and health systems will collectively lose $36.6 billion, including payments for COVID-19 patients, from March to June 2020 treating COVID-19 patients alone.”

Total revenue losses from canceled surgeries and other services

The AHA estimates that, because of canceled hospital services due to the COVID-19 pandemic, U.S. nonfederal hospitals stand to lose approximately $161.4 billion in revenue over a period of four months, from March to June 2020. This includes canceled surgeries, various levels of canceled non-elective surgeries and outpatient treatment, and reduced emergency department services.

Additional costs associated with purchasing needed PPE

The AHA estimates the non-treatment costs for hospitals and health systems to be $2.4 billion over a period of four months, from March to June 2020, or roughly $600 million per month. Demand for equipment and supplies, such as PPE, has increased as a result of the COVID-19 pandemic. “Hospitals have incurred additional costs as they struggle to acquire additional supplies to meet the needs of their patients and staff,” the AHA said. “Moreover, current guidelines require all hospital workers to wear some PPE, regardless of whether they are in direct contact with COVID-19 patients. These guidelines increase the need and expense for PPE relative to normal operations.”

Costs of additional support some hospitals are providing to their front-line workers

The AHA estimates the cost of support for front-line hospital workers in COVID-19 hotspots to be $2.2 billion through the end of June, or just under $550 million per month. This includes the costs of providing childcare, housing, transportation, and medical screening and treatment for COVID-19 for front-line workers. This estimate could increase as more outbreaks of COVID-19 occur, or if the policy decision were made to extend these benefits to all healthcare workers during the pandemic.

Other costs that hospitals and health systems face include drug shortage costs, wage and labor costs, non-PPE medical supplies and equipment costs and capital costs. “The totality of these costs combined with the uncertainty of the pandemic’s duration is certain to imperil hospital finances,” the AHA said.

Read the full report.