Hospitals Face Cash Crunch in 60-90 Days Due to COVID-19: Report

Outside Views Differ

Outside experts said that Strata’s methodology was basically sound, although they differed regarding the implications of the analysis.

Richard Trembowicz, associate principal at ECG Management Consultants, told Medscape Medical News that the projected losses on COVID-19 cases in the Strata report “might be a little bit light. The loss in reimbursement might be a little more significant per case.”

In contrast, Christopher Kerns, vice president of executive research for the Advisory Board Co, told Medscape Medical News that some of Strata’s assumptions may be overly pessimistic.

For a variety of reasons, including the need to perform some of the canceled elective procedures later on and the possibility of holding down length of stay on COVID-19 cases, hospitals may suffer less financial damage than the analysis suggests, he said.

Trembowicz pointed out that elective surgeries generate about 40% to 50% of revenues in the average hospital. So the loss of most of this revenue will really hurt hospitals, he said.

With regard to the reimbursement for COVID-19 cases, he cited the allowable commercial charges for two DRGs for respiratory illness cases: DRG 193, which includes complications, is reimbursed at $38,000, and DRG 195, which involves few or no complications, brings in $22,000. Medicare, which covers the bulk of those at risk, pays much less than these amounts; even with a 20% increase in COVID-19 case rates, he said, “we don’t think it’s going to be sufficient” to cover the losses.

The number of people who will get laid off and will lose private insurance coverage is unknown at this point, he noted. It’s also unclear how many uninsured and underinsured people will be treated for COVID-19.

Another major variable in predicting hospital losses, he said, is the eventual prevalence of COVID-19 infections. Estimates range from 20% to 50% of the population, he noted.

“At the high end of range, you’re looking at significant under-compensation [of hospitals] eventually. At the low end of the range, [the 20% raise] may be more than sufficient.”

Trembowicz agreed with Strata’s data that indicate that many hospitals could encounter cash-flow problems in 60–90 days. However, he said, hospitals should look into having insurance companies, which are receiving fewer claims for elective procedures, help finance their future expenses.

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