Beth Israel physicians: Hospitals are paid wrong, and it's leading to financial ruin

Despite federal assistance and news reports of full emergency rooms, hospitals are losing more than $50 billion a month, and issuing furloughs and layoffs to offset some of the deficit. There are many reasons why hospitals are facing significant financial challenges during the COVID-19 pandemic, but physicians from Beth Israel Deaconess Medical Center and Harvard Medical School in Boston argue in STAT that the biggest reason is the way hospitals are paid.  

The authors — Zahir Kanjee, MD; Ateev Mehrotra, MD; and Bruce Landon, MD — discussed how different types of care significantly affect a hospital's margin. For example, the procedures that have been canceled during COVID-19, like hip and knee replacements, radiology tests and colonoscopies, are "cash cows" for hospitals. What has stayed are the services hospitals usually break even or lose money on, like prolonged stays in the ICU and emergency room services. 

In "normal" times these services effectively balance each other out, with the profitable procedures subsidizing the unprofitable services, according to the physicians. But during a pandemic, hospitals have turned "almost exclusively to unprofitable treatment," the physicians wrote. "It is no surprise that hospitals are running massive financial deficits. In every respect, the pandemic has exposed the discrepancy in how hospitals are paid for doing procedures compared to providing non-procedural medical care."

The physicians offered three potential solutions for the reimbursement problem:

1. Fix imbalances in Medicare's reimbursement rates

2. Put better mechanisms in place to update relative prices 

3. Build up efforts to test new payment models

Read the full opinion piece here.

More articles on healthcare finance:
10 physician specialties that generate the most revenue for hospitals
20 large hospital networks received $5B in federal bailout funds
State-by-state breakdown of adjusted hospital expenses per inpatient day

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