The Pandemic’s Effects on Hospitals and Health Care: A Look Beyond the Headlines

Just as the events of 9/11 changed travel forever, so too will the COVID-19 pandemic have a lasting impact on health care delivery. Our experts share what can be expected and offer insight beyond the major headlines.

As both health care media and lay press have been consumed reported news related to COVID-19, headlines have become more alarming. “COVID-19 Could Cost Hospitals $200 Million Through June,” “Sending Hospitals into Bankruptcy,” “Healthcare Loses 1.4 Million Jobs in April as Unemployment Rate Hits 14.7%,” are just three among hundreds of stories prognosticating the struggles the health care industry has yet to face. 

What does it mean for the health care system overall—for hospitals, practices, and payers, in particular—both in the short-term and for the long haul? We turned to our panel of experts for answers and analysis. This much is certain: the change has been and will continue to be dramatic and the effects will be lasting. Our panelists include: 

• Larry Hsu, MD, medical director, Hawaii Medical Service Association, Honolulu, HI
• David Marcus, director of employee benefits, National Railway Labor Conference, Washington, DC
• Gary Owens, MD, president of Gary Owens Associates, Ocean View, DE
• Curtis Rooney, founder and president, Glen Echo Strategies, Washington, DC
• Arthur Shinn, PharmD, president, Managed Pharmacy Consultants, Lake Worth, FL

The elective surgery and procedure market all but disappeared in March and April. What kind of impact is this having on the health care system in in the short-term? Do you expect it to pick up once restrictions are eased and demand returns? 

Dr Owens: I think it is more complex than lack of demand. Many people are deferring elective care because they are worried about COVID-19 spread in health care facilities. Also, many facilities are closed or are offering significantly curtailed services. Plus, many have or soon will lose insurance coverage due to unemployment—they simply cannot afford the spend. 

Mr Marcus: The biggest issue is lack of demand, as most individuals are not willing to have elective procedures at hospitals or other outpatient settings when the risk of infection is so high.  But it is also the fact that hospitals in the hardest hit areas have had to expand capacity for hospital beds to care for infected patients.

Mr Rooney: Demand is pent up certainly. But in a number of communities, fear has replaced demand. We will need to communicate a common sense plan and a strategy that addresses these fears and allow people with or without insurance coverage to return and get the care they need.

What does a common sense plan look like? 

Mr Rooney: Opening up slowly and in stages is important. Communicating what treatments should be put at the front of the line is critical. The Hippocratic Oath, first do no harm, would be a good place to start. For example, the Trump administration has doubled down on the repeal of the Affordable Care Act (ACA) and the US Supreme Court will rule again whether or not the law is constitutional. Repealing without putting forward a replacement plan defies good public policy and unnecessarily puts patients in harm’s way. This is especially true during a pandemic.

What is likely to happen at the practice level?

Dr Owens:  I think patients and their physicians will be hesitant to rush into getting elective care, even if the facilities are open and the appropriate precautions are taken. Many Americans are concerned about potential exposure in a health care facility and may be very slow to seek elective or non-urgent care for quite a while.  In a poll conducted by the University of Maryland in early May, 67% said they would be uncomfortable shopping at a clothing store, and 78% would be uneasy at a sit-down restaurant. I think these numbers easily translate to continued concern about engaging in health care in a facility.

Mr Marcus: Most elective procedures are not going away – they are merely being deferred.  The question is how long will they be deferred? Staged facilities openings seem most likely, particular in the areas hardest hit.  Many individuals will simply not feel comfortable having a procedure in a hospital until an effective vaccine is available, so we could be looking at 18 month or longer before normality returns.

Dr Hsu: Still, as restrictions are loosened, elective procedures and surgeries will begin again. Because so many procedures have been delayed and facilities will not be at 100% capacity, the facilities will be very busy to meet demand. Capacity will gradually increase and patients who are queued up will eventually be cared for. I think the same will be true for patients waiting to see their providers for care for chronic conditions such as diabetes and hypertension. Expect long wait times initially. 

Dr Shinn: With regards to medications, I am hearing that, generally, individuals with chronic conditions appear to be receiving their medications. There is an increase in ordering 90-day supply of medications versus 30-day supply. However, fewer new treatments are being started. In the plans I am involved with, fewer new drugs are being ordered. A few step therapy programs and clinical studies have been put on hold. 

How do you see the situation evolving over the long-term? 

Dr Owens: I think the demand will be there, but with a different case mix—more urgent and postponed needed care and less elective care.  This is not good for hospitals, because for many systems, outpatient and elective services are more profitable and offset some of the losses for cases where inpatient prospective payments do not allow for adequate cost recovery.

Mr Marcus: I do not think the landscape will be changed forever in terms of what types of care are needed.  Some individuals might decide to forego elective services altogether, but my sense is that most care will simply be deferred until facilities have the capacity and individuals feel it is safe enough to receive the care.  In some situations, delaying procedures could lead to additional health issues, but any increase in care due to the delay should be immaterial. 

Dr Owens: My big concern is not with care that can be reasonably postponed, but with people not seeking care that should be given. For instance, in early May physicians in the state of Virginia reported a 30% drop in pediatric immunizations in March and a 76% drop in adolescent immunizations. Similarly, EMS systems across the country are showing significant decreases in services. The average reduction, as reported recently by the National Association of Emergency Medical Technicians, was 35%. MedStar Mobile Healthcare reported that calls for heart attacks and strokes were down 42% and 35%, respectively in April 2020 versus the same month a year ago.  

These illnesses did not take a vacation during April—people simply did not seek care or sought that care when it was too late. There will be a huge wave of needed care, and the effects are likely to be felt well beyond the end of the pandemic.  

Mr Rooney: Public health experts predict with reasonable certainty that the pandemic is with us for at least two years. This is a long time and means that we can never go back to the way it was. The events of 9/11 changed travel forever. The pandemic will change the way health care is delivered and financed dramatically in the future.

Dr Hsu: Yes, the business of medicine will change. While the levels will come back to pre-pandemic levels, there will be long waits for routine office visits. Waiting room capacity will shrink due to social distancing. There will also be a need to disinfect the offices between patients, disrupting what has been routine. This will add to the delays and long waits for routine visits.  There will be increased use of telemedicine and fewer face-to-face interactions.  

Dr Shinn: I agree. The increased telemedicine visits we are experiencing during the pandemic will continue even after the things subside. There will be an increase in virtual care. A lot of my health care plans are pushing for virtual care now, and are likely to continue to do so. Clinicians are finding that the virtual visit is a lot more cost-effective than a live office visit. One of the potential negative impacts for health workers is that fewer may be needed going forward. Practices may need fewer clinicians and front office staff. Operations are likely to be right-sized for a new era of increased virtual care. 

Of course, not all situations lend themselves to virtual visits. 

Dr Shinn: Of course not. It will be a stepwise approach, starting with a virtual visit followed by face-to-face only if needed. I could see a stepwise approach where the patient is seen virtually and then sent to the pharmacy to be seen by a nurse practitioner there and, if necessary, prescribed medication. The CVS Health Hub is set up for this purpose. Under such a scenario, a live visit at the physician’s office would be a last resort. [That being said,] while this concept theoretically cuts down on office visits, it is going to have to be managed diligently and in the best interest of the patient. 

Switching gears, how will the reimbursement landscape be impacted? 

Dr Owens: The issue here is mostly commercial. Unemployment will be slow to recover, and insurance coverage levels may never return to pre-pandemic levels. That means less commercial coverage and fewer higher paying patients for some systems. It also translates to financial problems for commercial carriers if a wave of care happens when top line revenue is down due to decreased enrollment. I am unsure how the actuaries can model for this.

Mr Marcus: When demand is low, commercial payers gain improved bargaining power to extract higher discounts on medical services.  Depending on how long it takes to return to pre-pandemic inventory, commercial payers should be able to negotiate better rates for their clients.

Mr Rooney:  This is an opportunity for both public and private payers to reassess how care is delivered and how it should be paid for in the future. Value-based purchasing will provide some answers. The big driver of pharmaceutical costs will require greater transparency system-wide. Payers will need to look at the bigger picture if they are to be successful.

How does the future look for hospitals and health systems? 

Dr Owens: The short answer is some hospital systems may not survive.  It seems counter intuitive that at a time when hospitals are overwhelmed by COVID-19 cases, they are suffering financially. However, because they have had to curtail many of their most profitable business lines, that is the case. If those systems don’t have enough cash to weather the storm, they may be forced to sell to a larger system, borrow, or consider bankruptcy.

Mr Rooney: Hospitals and health systems are being rocked. The pandemic will hit the rural areas like a chapter from the Old Testament. This will dramatically alter the future of negotiations between hospitals and insurers because it is likely to spur greater consolidation.

Dr Owens: I think stressed systems will need and negotiate for increased fees. But they will be difficult for insurers to meet if revenue is down due to lower payer enrollment.

Mr Marcus: Demand for services impacts pricing. Payers negotiating prices should be able to leverage depressed demand to obtain better pricing.  As has been noted, the counterweight to that is that some struggling hospital systems may seek to consolidate, and that consolidation would improve the negotiating power for the hospitals.

The situation will be most dire in urban areas, I think, since they have been hit the hardest. Some hospital systems in rural areas or in regions that have not been badly impacted have already opened back up for elective care.  It will take longer for urban areas, but normalcy should return eventually.

Mr Hsu: Some hospitals and health systems may indeed have to close because of the lack of cash flow. In my view, it will disproportionally impact rural areas and systems that serve primarily Medicare and Medicaid populations because of the relatively low reimbursement rates for these patients.

Smaller, independent physician practices were already experiencing a downward trajectory. Do you think the pandemic will hasten this decline? 

Dr Owens: I think it will. The pandemic will force practices to sell to systems or consolidate with larger practices. For some older physicians, it will trigger an earlier-than-planned retirement.

Mr Rooney: The small local practice will continue to decline due to additional competition from walk-in clinics, telehealth, and disruptions in the supply chain, among other reasons. Contraction of smaller practices will definitely continue. The move toward less expensive alternative providers such as nurse practitioners and physician assistants is part of this trend. Everyone is fighting for survival. Upstream, the battle between health systems and insurers will become fiercer.

Mr Marcus: Smaller practices will continue to exist in rural areas. Elsewhere, however, they will likely face financial hardship, making them ripe for consolidation or private equity buyout. As for pricing, consolidation has been impacting this for years. The current crisis will likely accelerate consolidations and, potentially, lead to increased rates.

Dr Owens: We already don’t have enough primary care clinicians; the pandemic is likely to make that situation worse. 

Mr Rooney: In general, the population is getting older and there are a host of chronic and increased comorbidities that go along with that trend. Managing these conditions virtually may be more cost effective and convenient especially with remote monitoring programs that can flag spikes and intervene more quickly.

Some states have passed legislation allowing individuals and businesses to defer health insurance payments. Additionally, there may be policy cancellations due to businesses failing and rising unemployment.  What impact do you think this will have on payers?   

Mr Rooney: State deferred insurance payment laws may have unintended consequences despite their good intentions because employers going out of business and laying off employees could also shift the cost of care to taxpayers and hospital charity care programs.

Mr Marcus: I agree. While I understand the challenges faced by individuals and businesses, I am not convinced the decision-makers have really thought through what this may ultimately mean. The problem is that we never properly prepared for a pandemic—how to respond to the increased demands on all our systems. One can only hope that this forces us to be better prepared next time, keeping in mind that next time could be years from now, or it could be in just a few short months. A lot depends on when a vaccine for COVID-19 will be available. 

Dr Shinn: Payers will feel the pinch. And it will end up trickling down and impacting other stakeholders. The takeaway is there’s going to be a dramatic change the health care delivery system. Hopefully, it will be for the best, but we really don’t know. 

Mr Marcus: We may not know the true impact on payers and the payer landscape for quite some time.