To someone with no knowledge about the business side of healthcare, hospitals may look like they got richer during the pandemic. COVID-19 hospitalizations can cost four-dollar figures, after all. But surprisingly, instead of higher revenues, hospitals faced massive losses.
Kaufman Hall predicted that hospitals could lose as much as $122 billion this year. Partial recovery of volumes, sluggish vaccine progress, and increase in COVID-19 cases were the factors found to cause such a substantial loss. The $122 billion in lost revenue were broken down into $64 billion in outpatient revenue, $41 billion in inpatient revenue, and $17 billion in emergency department revenue.
If patient recovery volumes were consistent, the vaccine progresses quickly, and COVID-19 hospitalizations decline, hospitals could only lose $53 billion. Still, that’s no small amount. So why are hospitals losing money when they’re overflowing with patients?
The Effect of COVID-19 on Hospital Finances
The idea of hospitals suffering major losses during a critical period can be both mind-blowing and frightening. But the healthcare system isn’t about to collapse, fortunately. We have to contain the virus fast enough to ensure that it stays that way.
The reason hospital revenue is dramatically decreasing is intense pressure. The surge in hospitalizations caused burnout among staff, leading to many quitting their jobs or getting COVID-19 themselves. It also depleted hospital resources. And because clinics and hospitals were high-risk areas, they faced steep declines in non-COVID-19 volumes, meaning fewer patients sought out services and treatments unrelated to COVID-19.
According to Kaufman Hall, America’s hospitals will struggle for another year to regain their financial health. And while doing so, they should continue to provide necessary care and services to a nation that’s still experiencing the effects of the pandemic. Hospitals will deal with these challenges whether COVID-19 recoveries in 2021 are fast or slow.
Ways Hospitals Can Recover their Lost Revenue
Even with funding from the CARES Act, hospitals’ profit margins were still negative in the second quarter of 2020. The American Hospital Association (AHA) projected that hospitals might lose $323 billion. And while $122 billion is considerably smaller than that, it doesn’t mean hospitals can have it any easier. But with these revenue-driving strategies, they can bounce back faster than they expect:
- Use Technology to Find and Collect Uncompensated Care
Many hospitals already deal with uncompensated care before the pandemic. In 2018, their receivables amounted to an estimate of $41.3 billion. And now, with the pandemic, hospitals are likely facing higher levels of uncompensated care.
Technology can help them find and collect overdue payments easier. Streamlined physician electronic health records (EHR) are one example of a high-tech system they can use. An EHR is a digital record of all patients’ information, from their prescription history to billing. It allows hospitals and clinics to track their receivables better and collect them on time. They can use the EHR’s electronic messaging feature to notify their patients about their balances. What’s more, the receipt can be issued electronically, reducing hospitals’ printing costs.
- Collect Medicare Payments that Rightfully Belong Them
Nearly half of all Medicare discharges are coded as transfer diagnosis-related groups (DRGs). This causes hospitals to get underpaid. While they may recover transfer DRG payments, chances are they don’t find 100% of them.
This problem occurs when a hospital discharges a patient as a transfer but doesn’t receive the ordered post-acute care. Hospitals can resolve this problem through transfer DRG recovery solutions that quickly spot underpayments and turn them into revenue.
- Streamline Data Analytics
A hospital’s IT system is also crucial in increasing revenue. But most healthcare executives admit that they use IT and analytics tools with limited capabilities. So how will they streamline their data collection and analytics?
Better technology is also the key. They should invest in analytics tools that capture accurate information and minimize the chances of denials. This will help them predict their revenue and create plans based on their revenue stream.
- Partner With Larger Organizations
Experts believe that the pandemic will permanently change the healthcare industry. Lesley Reeder, RN, vice president at COPE Health Solutions, projects that many primary care physicians and small specialists partner with larger organizations. This will lead to more mergers and acquisitions in healthcare.
The pandemic may also accelerate the move to value-based care. This can allow providers to get paid based on patient outcomes, not simply on the number of procedures or tests they performed. Roger B. Weems, vice president of advisory services at Premier, says accelerating the path to value will ultimately enable providers to offer higher-quality healthcare.
Hospitals still have a long way to go to completely recover from the pandemic, but at least solutions are available to help cut down their losses. Patients can also contribute to their providers’ recovery. They should ensure that their insurers are paying hospitals correctly. The work of regaining the healthcare industry’s financial health should come not just from hospitals themselves but to everyone benefitting from them.