Home News Hospitals work to balance their budgets as a new COVID-19 wave hits

Hospitals work to balance their budgets as a new COVID-19 wave hits

Hospitals across California lost billions of dollars in their response to the coronavirus pandemic: At the direction of Gov. Gavin Newsom, they canceled elective surgeries and shored up space and supplies for an anticipated surge of patients.

The surge they were expecting didn’t come back in the spring, but now hospitals are facing a second wave of coronavirus patients—and many of them are financially in the red.

“It’s important to note that before the pandemic, about 40% of California hospitals operated in the red, while about 11% broke even,” said Adam Blackstone, vice president of communications for the Hospital Associations of Southern California. “That 40% has now increased to nearly two thirds.”

Hospitals statewide lost an estimated $14 billion by early May because they postponed elective surgeries and other procedures to clear space in anticipation of a flood of coronavirus patients that never occurred.

Local hospitals told the Business Journal at the time that they were making every effort to avoid laying off or furloughing staff.

More recently over the past week, the number of people hospitalized for coronavirus surpassed 100. When the city was under its strictest stay-home orders in late April, hospitalizations remained in the 40s and 50s, but since officials have lifted orders, the number has been steadily climbing.

While Long Beach hospitals resumed performing elective surgeries mid-May, the initial reduction inflicted huge financial losses to them, hospital leaders said. Carolyn Caldwell, the president of St. Mary Medical Center, said the canceled procedures and services had accounted for a significant percentage of revenue in pre-pandemic times.

Memorial Hospital faced a similar situation.

“At the same time, we have incurred significant expenses to build surge capacity and secure equipment to take care of an anticipated influx of COVID-19 patients,” said John Bishop, the CEO of Memorial.

Federal assistance with the Coronavirus Aid, Relief, and Economic Security Act and FEMA has helped some, but not fully. The HASC estimates hospitals statewide have lost $14.6 billion in lost revenue, according to Blackstone, and the federal government has provided only $4.6 billion in relief. The lost revenue also doesn’t account for the cost of COVID-19 preparation for acquiring personal protective equipment, ventilators and space.

In addition to lost revenue from canceled procedures, hospitals also saw a dip in emergency room patients, because people were either afraid of contracting the virus at hospitals or they were staying home and not getting injured as much, according to the latest report from non-profit California Healthcare Foundation on the financial impacts of the pandemic. The report’s authors estimate a  40% to 60% decline in emergency room visits.

The report notes that one of the long-term effects of the pandemic on hospitals will likely be a surge in hospital price inflation and higher insurance premiums for consumers. In a scenario where 5 million jobs are lost, the authors estimate that about 3 million Californians will lose their employer-provided health insurance in the coming months. This would force more people onto Medi-Cal, which typically pays less for services than private insurance.

Many others will likely go without insurance altogether.

“In turn, this would exacerbate an already very difficult public policy issue — the growing unaffordability of health insurance and health care in the commercial market,” the report notes.

However, one of the long-term effects of the pandemic is that it may force hospitals to be more efficient, the authors write, such as by expanding telehealth and better provider-to-provider connectivity, ultimately helping to balance costs.

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