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  • BIOETHICS FORUM ESSAY

Lessons from Covid-19: Why Treating Sick Patients is Bad Business for Hospitals

Published on: May 28, 2020
Published in: Covid-19, Hastings Bioethics Forum, Health and Health Care

Hospitals in the United States, the very institutions created to care for the sick, are losing money taking care of patients with Covid-19. The situation is so dire that the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), which allocated an extra $100 billion for health care, and the additional $75 billion for health care from the stimulus package will not come close to bailing out our hospitals. When broken down, $100 billion equals an additional $108,000 dollars per hospital bed. Meanwhile, deaths from Covid-19 surpass previous weekly averages for other common causes of death like heart disease and cancer.

The pandemic casts a harsh spotlight on the misallocation of health care resources in the U.S. Health care consumes 18% of the gross domestic product, and America spends more money on health care than any other nation in the world. However, the amount of health care dollars dedicated to the care of acutely sick patients is insufficient. Sick patients can require a large bulk of hospital resources. But with our flawed reimbursement system, the more hospital resources that a patient needs, the more money the hospital stands to lose taking care of that patient. Hospitals tend to be reimbursed by diagnosis, which means that they receive the same amount of money for patients who need more nursing, more intense treatments, and longer hospital admissions as for less ill patients with the same diagnosis. For example, a patient with pneumonia who does not have Covid-19 has an average hospital admission stay of 3.2 days, while a pneumonia patient with covid will be in the hospital for an average of 19 days. The covid patient may be medically very complicated, requiring intensive care admission and ventilation. Covid-19 is so expensive to institutions that many rural hospitals have closed or are on the brink of closure. Hospitals that are filled to capacity and taking care of the sickest patients are doing so at a loss. The net result is a system that penalizes hospitals for taking care of sick people.

The bread and butter of hospital budgets are elective procedures. For months, governors and administrators have mandated that elective procedures cease to avoid spreading the virus to non-covid patients and increase hospitals’ capacity to care for pandemic patients. While elective procedures are beginning to be phased in, the economic damage has been done. Stopping elective procedures has been bad for maintaining the cash flow needed to keep most hospitals afloat. New York Presbyterian Hospital, for example, which is located in New York City, the epicenter of the pandemic, estimates that the hospital will suffer a loss of between $104 million and $454 million in 2020 due to Covid-19.

The financial impact of taking care of medically complicated patients, as well as cancelling elective procedures, has led to widespread layoffs at hospitals. Hospital staff, including emergency room nurses and physicians, who are not laid off may receive a reduction in hours or compensation and benefits, all while risking their lives fighting the epidemic and often doing so without the proper protective equipment. A recent NPR report said that at least 200 hospitals nationwide cut employees’ hours, mostly in the form of furloughs.

The bottom line: medicine in the U.S. no longer fosters patient care but rather diagnostic and procedural care. The net result of the current reimbursement structure, where diagnostic evaluations and procedures are generously reimbursed but actual patient care can cost the practitioner money, is an increase in unnecessary procedures and drastically decreased focus on patient care. One recent survey found that 73% of physicians are concerned about the number of excessive procedures and testing being done.

It is time to overhaul how we structure hospital insurance payments. Our current reimbursement model only serves to illustrate the economic fragility of a system that cannot withstand a major public health crisis. Fifty-five percent of American receive health insurance through the workplace. The Economic Policy Institute estimates that 16.2 million workers could have lost their employer-based health insurance. With further expected job losses the virus could cost 47 million jobs.

Should people who have lost their jobs and health insurance have to pay $73,000 if they are hospitalized with Covid-19? Will the government pick up the bills for hospitals that treat covid patients? Despite government reassurances that Covid-19 testing and treatment will be free, there are reports of patients receiving large medical bills.

Surprise billing has long been a practice that health care providers use to increase revenue. With surprise billing, providers who are not in a patient’s insurance network bill unsuspecting patients for the difference between what they charge and what the insurer pays. The CARES Act prohibits surprise billing for Covid-19 care, but this practice should not be allowed to resume after the crisis has passed.

The government, in tandem with insurers, providers, health experts, and professional organizations, must act quickly to fundamentally change how we reimburse and administer hospital care. Our health care institutions and providers must be able to provide competent and thoughtful care of patients, and not rely on elective procedures or shady billing practices for solvency.

Kyra Beth Blatt is a board-certified neurologist working in private practice in New York City. Karyn Boyar is an assistant professor of nursing at New York University’s Rory Meyers College of Nursing.

 

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  1. Lori D Smith Robbins on

    This is an excellent overview of problems in the health care system that affect all Americans. Even better, the article provides a clear solution to those problems.

    Reply
  2. Arthur H. Lilling on

    This important article highlights endemic failures in the basic equity of our healthcare system; it should be widely circulated so the general public can better understand the issues and make political choices that can lead to appropriate reform. The article is well written and focused.

    Reply

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