Beaumont Health CEO's ideas on heading off pandemic-spurred hospital financial crisis

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The COVID-19 pandemic is creating a financial crisis that could cripple U.S. hospitals and health systems, Beaumont Health CEO John Fox wrote in an op-ed sent to Becker's Hospital Review. 

U.S. hospitals have rapidly responded to the pandemic, shifting their operations and resources to test and treat COVID-19 patients. In doing so, hospitals are losing a key source of revenue: nonemergent procedures.

"Over decades, American hospital systems have become dependent on higher margin surgical, imaging and other procedures cross-subsidizing low or negative-margin complex medical patients often with many chronic diseases," Mr. Fox wrote. 

To exemplify the looming financial crisis, Mr. Fox outlined how the pandemic will affect Beaumont Health, an eight-hospital system with 3,400 beds, $5 billion in revenue and 38,000 employees. 

Beaumont Health leaders have cut 80 percent of surgery and procedure volumes, as well as imaging services to free up space for COVID-19 testing and treatment. 

As a result, Beaumont expects a hit of $1 billion to $2 billion from COVID-19. This is because surgical services produce higher revenue than visits from inpatients with COVID-19.

"The 20 percent to 40 percent drop in our revenue can in no way be absorbed by our 4 percent operating margin and cash reserves," Mr. Fox wrote. 

What's more worrisome is that the missing revenue is critical to paying its 38,000 employees every two weeks, Mr. Fox said.

To address the looming financial crisis, Mr. Fox said that the U.S. should establish a hospital system fund "immediately." 

This fund, which would have about $300 to $600 billion, would allow health systems to take periodic interim payments to offset the anticipated revenue loss.

"Eighty-five percent percent of America’s hospitals are not-for-profit organizations that operate on relatively thin margins," Mr. Fox wrote. "Their financial viability can collapse absent immediate action."

 

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