Shaky US hospitals risk bankruptcy in latest Covid wave

Bloomberg October 15 | Updated on October 15, 2020 Published on October 15, 2020

Coronavirus has sidelined profitable elective procedures and pushed up costs to keep patients and staff safe

A grim reality is setting in across the US hospital sector: a surge in coronavirus infections is encroaching while most facilities are still recovering from the onset of the pandemic.

The growing number of cases is threatening the very survival of hospitals just when the country needs them most. Hundreds were already in shaky circumstances before the virus remade the world, and the impact of caring for Covid patients has put hundreds more in jeopardy.

The new coronavirus sidelined profitable elective procedures and pushed up costs to keep patients and staff safe. Meanwhile, hospitals are losing the privately insured patients they depend on as millions of Americans lose their jobs and employer-sponsored coverage.

“It sort of all comes together as essentially a triple whammy,” Aaron Wesolowski, vice-president for policy research, analytics and strategy at the trade group American Hospital Association, said in an interview.

Why the average American was hit hard by Covid

More than 2,15,000 Americans have now died from the novel coronavirus and 7.8 million have had confirmed infections, numbers that set the US apart on the world stage. Though new virus cases fell last month after a summer spike, Covid-19 is again on the rise, especially in the Midwest. Thirty-eight states are now considered hot spots, according to the Kaiser Family Foundation, which considers rising cases, test-positivity rates and new daily cases per million population in its analysis.

Financial pain

The AHA has estimated the pandemic will cost US hospitals more than $323 billion through the end of this year. US hospital revenue totalled about $1.1 trillion in 2018, according to the most recent AHA data available. The industry group is asking Congress for an additional $100 billion and full forgiveness of loans made under Medicare’s accelerated payment programme, among other requests for relief.

As many as half of hospitals could be losing money by year end, Wesolowski said, citing a report it released in July from Kaufman, Hall and Associates. That’s up from about a third that were operating at a loss ahead of the pandemic.

More than three dozen hospitals have already entered bankruptcy this year, adding to a similar number last year, according to data compiled by Bloomberg. More than a dozen in rural areas have also shut their doors, according to the Cecil G. Sheps Center for Health Services Research at the University of North Carolina. The AHA put the total US hospital count at 6,146 in its most recent report, a decrease of 64 from the previous year.

The financial pain has flowed through to Wall Street. Many of the hospitals that entered bankruptcy this year were part of Quorum Health Corp’s Chapter 11 filing in April. Quorum’s 24 hospitals and other facilities struggled under the demands of treating coronavirus patients. In late June, a judge approved the company’s exit plan, which wiped out shareholders and handed the chain to creditors.

Rural hospitals are closing down right and left, Bert Cunningham, city manager of Bowie, Texas, said in an interview.

Central Hospital of Bowie closed in February and its owners filed for bankruptcy two months later, debilitated by years of red ink, Cunningham said. Now the property is up for sale for any use, potentially leaving the 10,000 residents in its service area — many of whom are elderly —30 miles from the nearest acute-care emergency room, he said.

Larger hospitals hit by later waves of cases learned how to isolate Covid patients and convince others to come in for some elective surgery — the more profitable procedures that pay the bills, said Sanjay Saxena, co-leader of The Boston Consulting Groups Center for US Health Care Reform and Evolution. But disparity between the leading facilities and the rest is getting starker, he said.

Millions of new job losses mean a cut in the number of Americans with private insurance — a critical component for hospitals since federal payments don’t cover the bills. In an April report, Saxena said almost two-thirds of US hospitals face material financial risk — compared with 20 per cent pre-pandemic — with options extremely limited for the 25 to 30 per cent at the very bottom.

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Published on October 15, 2020
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