Financial Implications of the COVID-19 Epidemic for Hospitals: A Case Study

Abstract

A concern about the COVID-19 pandemic is that U.S. hospitals may not have the capacity to serve all the patients seeking care. With all these new patients, could the pandemic be financially beneficial for hospitals? We suggest the answer is likely no for three reasons. First, many hospitals have experienced reductions in both surgical and clinic volumes resulting in substantial revenue losses. Second, there are reports of increases in the cost of supplies. Finally, the increase in intensive care services required to respond to the surge of COVID-19 patients will result in a shift of patient volume from acute to intensive care, and this shift will not likely improve profitability. To estimate the possible magnitude of each of these effects, we analyze 2019 financial data from a profitable, well-run hospital in Washington State. Our estimates suggest that the COVID-19 epidemic will cause dramatic financial losses for hospitals and that the bulk of those losses will result from lost revenue. We suggest that these losses will be sufficiently large to create major changes in the hospital industry including changes in ownership, changes in access to credit, changes in care delivery and changes in choices of community benefit provision.

Keywords: COVID-19, hospital, profit, cost