The Ongoing Financial Impacts of COVID

Hero blog Financial impact of covid
Cross Country Healthcare
August 10, 2020 03:32 AM (GMT-04:00)

The coronavirus (COVID-19) pandemic has left little unchanged in its wake. Nearly every aspect of our daily lives has been altered, the economy has been dealt with many blows, and Americans' well-being and livelihood are at risk. While the effects are undoubtedly widespread, no other industry faces more significant challenges than the healthcare sector. While ensuring the best possible care for the communities they serve is the top concern for healthcare providers and leadership, health executives are also mindful of the global pandemic's current and future financial struggles.

The issues facing provider organizations have been wide-ranging and abundant, including difficulties relating to medical equipment supplies, clinical staff protections, and market dynamics decreasing the bottom line, among many others. Fears over a second surge of the disease have created market volatility across the board – interest rates are increasing, and pricing bond offerings is more complicated than ever. Many healthcare executives at not-for-profit systems have even made the difficult decision to postpone large new bond issuances due to the uncertainty of the market.

As uncertainty remains about the arc of the pandemic and the financial ramifications, industry leaders pay close attention to the following:

Financial Concerns.

As hospitals try to slow the spread of the disease, many have cancelled elective procedures while seeing a decline in ER visits due to fear among patients of catching COVID-19. The AHA estimates that, as a result of canceled hospital services due to the COVID-19 pandemic, U.S. nonfederal hospitals stand to lose approximately $161.4 billion in revenue over just four months. This includes canceled surgeries, various levels of canceled non-elective surgeries and outpatient treatment.

Hospital emergency rooms (ERs) have remained open during this pandemic, but patients, even those with serious health conditions, don’t seem to be using them. A survey of nine major hospitals earlier this month showed the number of severe heart attacks being treated in U.S. hospitals had dropped by nearly 40% since the COVID-19 virus took hold in March. Patients are fearful of entering hospitals amid the pandemic, some calling it “a virus of fear.”

Now, healthcare executives are questioning whether their hospitals will see adequate reimbursement form treating COVID-19 patients, many of whom are unable to self-isolate, uninsured or may be homeless. This has resulted in a shortage of cash on hand for many facilities and created a struggle where the long-term ramifications could be far-reaching. Executives must now consider what the financial picture for the industry looks like post-COVID-19 and where they can add new sources of revenue.

Workforce Implications.

Hospitals and health systems are concerned about having an adequate supply of health professionals to meet the needs of their patient population and among fears of a second surge. While some facilities have been disproportionately affected by COVID-19, others have yet to see their first COVID-19 patient. As a result, demand for staffing varies widely in different parts of the country. Some regions are seeing tighter supply constraints than others, which has been exacerbated by the quarantine of so many healthcare professionals. All of these forces are creating additional pressures on wage expectations and the movement of talent.

The supply of healthcare talent is declining across the nation as many providers fall ill themselves, experience burnout and fatigue, leave their positions due to lack of PPE supplies, or a range of other factors. With many nursing education programs on hold because they are unable to provide students with clinical experience in the current climate, healthcare leaders fear workforce shortages could impact the industry for years to come.

Shortage of Experience.

One of the biggest concerns in the early stages of the pandemic was just how prepared were American hospitals and health systems to weather this and other types of disasters. In a 2017 article published in the Journal of Emergency Management, research findings showed that while 80% of hospitals had disaster plans in place, only 17.5% felt their disaster plans were “very sufficient” and did not require any revisions. While some large health systems have command centers already established to handle emergency management response at this level, many others do not have the capabilities, the resources, or the specific expertise.

This situation presents an opportunity to identify best practices in emergency management protocol, to shore up executive training and establish ongoing education and recruitment practices to keep their organization ready should another global health crisis occur.

Concerns for Rural Hospitals.

These challenges impact the entire healthcare sector, but rural hospitals are uniquely impacted. Prior to the pandemic, rural hospitals faced financial struggles and a dire shortage of healthcare providers. In fact, 67 percent of rural areas are considered Health Professional Shortage Areas, and the majority of areas continue to be the most underserved.

The financial impact of COVID-19 on rural hospitals is two-fold. First, as is the case with many urban hospitals, elective surgeries and services have been canceled or delayed. Second, spending for PPE and other medical supplies has increased. Considering their small size and the fact that they already had low occupancy rates and thin margins prior to COVID-19, this scenario of declining revenue combined with increased expenses has created financial challenges for rural hospitals.

Looking Ahead.

Despite many economic stimulus packages and bailouts for hospitals, there are still many concerns about what the U.S. will look like after the pandemic. As healthcare organizations face the arduous but necessary reflection on their level of preparedness, successes and lessons learned while uncertainty remains a second wave, leaders will also need to look to the future to adjust practices, policies and planning in a post-pandemic world.

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