COVID-19 Pandemic Hitting Hospital Finances Hard

 As the coronavirus pandemic continues to rage, hospitals are beginning to face major financial problems which could in some cases threaten their ability to stay in business, according to a new survey.

To conduct its research, management consulting firm Kaufman Hall reached out to more than 800 U.S. hospitals and asked them about their financial situation. The news the hospitals shared was grim.

Kaufman Hall’s National Hospital Flash Report, which draws on data from March, said that respondents were seeing falling volume and revenue as expenses stayed flat or began to rise. This has resulted in a massive dip in margins over just the past few weeks, the hospitals reported. And as the researchers pointed out, this has been particularly hard on not-for-profit hospitals, whose margins were slim even before the pandemic hit.

One of the key culprits in the worsening financial situation was substantial drops in volume, respondents reported. Researchers found that operating room minutes were down 20% year-over-year and ED visits down 15% year-over-year. Meanwhile, the median hospital occupancy rate among respondents was 53% for the month.

As a result, respondents said, budgeted inpatient revenue has fallen 13% in March, budgeted outpatient revenue 17% while levels of bad debt/charity care climbed 13% year-over-year.

The results of these changes have been dramatic. The firm concluded that operating margins have fallen 150% year-over-year among hospitals participating in the survey. Operating EBITDA margins dropped more than 100% and operating margins fell 170% below budget for the month.

Given these circumstances, it seems likely that health IT budgets will be frozen or even decreased, at least until the pandemic begins to recede and possibly for much longer and for some very specific areas like telehealth or solutions that improve reimbursement/collections. Of course, nobody in the HIT department will agree that this is a wise thing to do, but with health leaders staring down the barrel of a financial crisis or even bankruptcy, it’s possible that they’ll be desperate enough to see some IT spending as “nice to have” rather than a necessity.

That being said, IT departments can do something to address this problem, not just to protect their viability but also to keep meeting patient needs and supporting clinicians effectively.

Unfortunately, depending on the solution, IT can be seen as a cost center rather than a revenue center (though offering strong support for telemedicine might move the needle a bit). The reality is that IT infrastructure will continue to pose a major expense for providers. However, IT departments can hunker down and look critically at the projects and infrastructure they are supporting and set priorities that address today’s pandemic problems.  Plus, they can focus on those projects that do help the organization generate revenue, lower costs, and avoid waste.

To get a sense of how this might work, consider reading our recent piece on how UW Medicine’s IT leaders helped to get the COVID-19 care process under better control.

As you can imagine, the IT department was only one player in the mix. The health system mounted a far-reaching team effort focused on meeting the daily challenges of virus treatment as they arose, one which changed whatever processes that might encumber the clinical team.

However, IT clearly played a major role in this operation. This called for significant shifts in how the department worked. For example, leaders had to rethink their change management process to prioritize COVID-19-related change requests.

Of course, it’s unclear what evolving coronavirus demands will ultimately have on providers generally, much less their IT department. Nonetheless, this is still a good time for IT leaders to look at the big picture and see how their role might change.

About the author

Anne Zieger

Anne Zieger

Anne Zieger is a healthcare journalist who has written about the industry for 30 years. Her work has appeared in all of the leading healthcare industry publications, and she's served as editor in chief of several healthcare B2B sites.

   

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