April 24, 2020 - Tennessee hospitals are experiencing a negative financial impact of approximately $1 billion per month due to the pandemic, according to an analysis conducted by the Tennessee Hospital Association (THA).
As the COVID emergency continues, hospital revenues dramatically have dropped as both inpatient and outpatient service utilization have plummeted. At the same time, the costs for personal protective equipment (PPE) and other essential resources that are in short supply due to the crisis rapidly have increased.
"Tennessee hospitals have taken all of the appropriate steps to conserve resources and create capacity for COVID-19 patients," said THA President and CEO Wendy Long, M.D. "These facilities have maintained expensive operations in preparation for and to serve COVID-19 patients while experiencing a dramatic drop in volume and services that typically comprise their core business. This creates a paradox of hospitals experiencing severe financial strain when their services are most needed."
Hospitals are vital to the communities they serve and accept all patients from all payer groups, including Medicaid, Medicare, commercial insurance and the uninsured. The result of accepting many patients whose care is reimbursed below cost or not at all is that hospitals have thin operating margins. Hospitals carefully must balance their offered services in order to survive.
"In 2018, 71 hospitals in Tennessee had operating margins that were 2 percent or below, and 60 had zero or negative operating margins," Dr. Long added. "It doesn't take a pandemic to stress the system, and COVID-19 has made the situation much more difficult for many of our hospitals."
Part of the statewide call to create hospital surge capacity and preserve PPE and other crucial supplies included the cancellation of elective medical procedures. Hospitals began postponing non-essential procedures even prior to Executive Order 15 and willingly complied with all directives in order to support the public health emergency. However, the unintended result is a staggering negative impact of approximately $1 billion per month to an industry that typically generates an average of $1.7 billion in monthly revenues.
This issue has been a top priority for THA, which has advocated for financial relief for hospitals during this crisis.
"Recent funding opportunities for hospitals that are being made available at the federal and state levels are very much appreciated lifelines to this vital industry," Dr. Long said. "However, the reality is the impact is so massive that more assistance will be needed in order to ensure continuity of operations at hospitals and provide a necessary level of care. Now more than ever, Tennesseans need their hospitals to remain open and caring for their community."