US Hospitals Halt Lucrative Procedures Amid Coronavirus Crisis, Job Cuts Follow

US hospitals and physician groups are beginning to feel severe financial strain as they shift operations from profitable procedures to focus on the rapidly spreading coronavirus pandemic.

The hospital industry nationwide is under growing pressure to halt lucrative elective surgeries, relocate patients not infected with coronavirus from frontline facilities, and greatly expand capacity for expensive intensive care to address the healthcare crisis.

In roughly a dozen states, including hard-hit New York, New Jersey, and Washington, government officials have ordered these changes. Nationally, the Centers for Disease Control and prevention recommended facilities reschedule elective surgeries as necessary.

Hospitals administrators say high-margin services, such as orthopedic and heart procedures, can account for up to 80% of revenue, while infectious disease and intensive respiratory treatments are less profitable.

"The red ink is going to be pretty deep," Kevin Ward, chief financial officer of New York-Presbyterian's Queens hospital in New York City, told analysts.

The hospital, like many in the epicenter of the US outbreak, has been inundated with patients with COVID-19, the highly contagious, sometimes deadly respiratory illness caused by the virus.

Unlike with typical elective or urgent surgeries, COVID-19 patients "are not high-paying cases, and they require a lot of care, isolations and (personal protective equipment)," Ward said.

Healthcare networks in Atlanta, Kentucky, and Maine have begun furloughing hundreds of employees, as offices and surgical centers shutter and hospital wings convert into coronavirus wards.

The $2 trillion coronavirus stimulus package approved by Congress includes a $100 billion relief fund to reimburse medical providers. The fund should cover hospital losses for about 2 months if revenue declines 50%, a JPMorgan analysis found. That excludes costs for more bed capacity and extra supplies to fight the outbreak.

Some hospital networks have continued performing non-emergency surgeries before the anticipated surge of COVID-19 patients arrives.

"At the moment, we're making individual decisions," said UC Davis Health Chief of Surgery Diana Farmer, whose Sacramento hospital late last week had just nine COVID-19 cases. It was still treating hernias, cataracts, and performing orthopedic surgeries if it was determined the procedure should not wait to reduce pain or avoid potential complications later.

"There are patients begging to get their cases done early. They are afraid that they might have to wait for 6 months," Farmer said.

Tenet Healthcare-owned United Surgical Partners International, which operates over 400 ambulatory facilities, said it was performing a limited number of procedures that, if deferred, would pose a health threat to patients.

Kaiser Permanente, too, said its physicians would decide if an elective procedure should go forward.

There is a risk that these surgeries could spread the virus as it is contagious even if an infected person has no symptoms.

"If there is a low number of suspected or confirmed cases, many hospitals will lean toward maintaining their surgery schedule for as long as they can," said George Huang, Wells Fargo healthcare analyst.

Furloughed workers

For hospitals stopping elective surgeries, the financial impact has been immediate.

St. Claire HealthCare, a Kentucky-based medical center, furloughed 300 employees, or 25% of its workforce, following a "significant decline" in patient visits. Those furloughed were not directly involved in patient care and would be recalled if government funding becomes available, it said in a statement.

Primary care doctors have also seen in-person visits plummet, adding pressure to small practices that operate with thin margins, said American Academy of Family Physicians President Dr. Gary LeRoy.

LeRoy's Dayton, OH, practice is taking on only urgent visits. Like other family physicians in the group, he now sees patients via telemedicine, though the technology has raised concerns about payment.

"If you're billing for it now, the question was, when do I get reimbursed for it? Is it 60 days from now? I might not have a practice 60 days from now if I'm just going to do three-fourths of my practice by telemedicine," he said.

InterMed, a Maine-based primary care practice, furloughed about one-third of its workforce after stopping non-essential services, a spokesman said.

Atlanta's Gastroenterology Associates, which has backing from private equity firm Frazier Healthcare Partners, furloughed about 300 of its more than 800 employees after cutting elective surgeries, which account for nearly 80% of procedures.

Furloughed workers will receive a stipend and health benefits, a spokeswoman said. The practice hopes to rehire employees once the crisis ends.

Clearing the decks, but for how long?

In the hard-hit New York-area, with more than 38,000 cases in the city alone, hospitals have converted post-operative floors, pediatric wings, and cafeterias, into coronavirus wards.

"Thank goodness we eliminated the elective "schedule," Richard Keenan, chief financial officer of Valley Health System in Ridgewood, NJ, told Jefferies analysts. "That freed up a lot of staff and resources."

Healthcare administrators are trying to calculate how long they will need to postpone procedures as the COVID-19 crisis has yet to reach a peak.

New York-Presbyterian's Queens hospital is rescheduling elective procedures for mid-May. Providence Sacred Heart Medical Center in Spokane, Washington, pushed most procedures back three months and annual wellness exams by six months.

But these are merely educated guesses for when it might be safe to return to business as usual.

—Robin Respaut and Rebecca Spalding

Source