Elective surgeries—mostly paused due to the pandemic—are critical to hospital finances
In these times of crisis, you might expect that hospitals are raking in the profits. After all, they are, literally, on the front lines of dealing with the pandemic. Wouldn’t it make sense that they’re also reaping the rewards?
The reality is far more complicated. The COVID-19 outbreak’s effect on the hospital industry has been harsh. Two of the country’s largest health systems, Tenet Healthcare and HCA Healthcare, have seen their stock value decline 30% to 50% so far this year.
That’s a significantly worse outcome compared to broader markets. Financial pressure has led to a dynamic wherein a critical medical sector has had to consequently lay off workers—while still expected to lead the charge in the midst of a crisis.
One driving reason is a monumental decrease in major hospital systems’ most profitable enterprises: so-called elective surgeries.
To parse the terminology: An elective surgery isn’t necessarily a cosmetic or purely optional surgery. It can be an operation scheduled in advance to improve your quality of life, according to Johns Hopkins. That might not be an immediately life-threatening event—but that doesn’t mean it’s insignificant. The range of elective procedures could be anything from removing a kidney stone to hip replacements to biopsies for cancer patients.
Such elective procedures were initially paused given space constraints at medical facilities and the public health risks of exposing people to the coronavirus. But the downstream financial effects have been significant. Elective surgeries bring in, on average, $700 more per patient admission than an emergency room stay, according to one study conducted by George Washington University researchers.
On Tuesday, New York Gov. Andrew Cuomo announced that certain hospitals in the state (ones outside of New York City, the current epicenter of U.S. coronavirus cases) could “resume performing elective outpatient treatments on April 28.” He’s not alone—Colorado Gov. Jared Polis said earlier this week that certain outpatient procedures could begin resuming within a week in accordance with new federal government guidelines.
These announcements come with a whole lot of caveats. For instance, 19 of New York’s 62 counties will still face restrictions when it comes to such procedures, and individual hospitals will be subject to metrics such as recent COVID-19 hospitalizations.
The perfect storm of factors is hitting the industry hard.
“Lost revenue is due in large part to the cancellation of nonemergent care and the deferral of other nonurgent treatments and visits,” a spokesperson for the American Hospital Association, the industry’s main trade group, told Fortune. “Decisions about these procedures should be determined at the state, local, and community level in consultation with hospitals and the clinical recommendations of physicians and nurses.”
In short: Hospitals are in a precarious position as they’re overwhelmed with coronavirus patients and been forced to put their biggest moneymakers on the back burner. And that’s not a purely financial problem—it’s a personnel issue too.
“This strain has resulted in some hospitals having to furlough or lay off health care workers to respond to this public health crisis,” an AHA spokesperson said.
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