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Growing Costs And Shrinking Revenues Squeeze Hospitals As They Brace For Coronavirus

Tents setup outside the main entrance to Harbor-UCLA Medical Center in Torrance, Calif., Wednesday, April 1, 2020. The hospital plans to triple the number of available ICU beds to care for patients amidst the spread of COVID-19.
Brittany Murray
MediaNews Group/Long Beach Press-Telegram via Getty Image
Tents setup outside the main entrance to Harbor-UCLA Medical Center in Torrance, Calif., Wednesday, April 1, 2020. The hospital plans to triple the number of available ICU beds to care for patients amidst the spread of COVID-19.

As many cities and regions of the country brace for a surge of coronavirus patients over the next few weeks, hospitals are scrambling to get ready. The increase in costs to convert beds, buy equipment and increase staffing time in order to care for critically ill COVID-19 patients is adding up at a time when revenues are down.

And the resources they have to turn to may vary, depending on the demographics of the patients they serve.

"We are very concerned," says Dr. Anish Mahajan, chief medical officer ofHarbor-UCLA Medical Center in Los Angeles. "We are doing everything we can to prepare."

Harbor-UCLA is a public hospital, and the majority of its patients are low-income: about 65% are on Medicaid, 15% are on Medicare, only 10% have private insurance and the rest are uninsured, including many undocumented immigrants.

Mahajan says the hospital plans to triple the number of ICU beds available to treat critically ill patients. It normally has 450 beds including 44 ICU beds.

Their preparations include converting some regular hospital wards into ICU level of care, he explains, which means adding new equipment like heart monitors, oxygen monitors and ventilators.

"We are working very hard on projecting the number of ventilators we need," he says. "That said, we know we are short."

The hospital now has 50 ventilators but Mahajan says they could easily need 100 more.

Across town at privateCedars-Sinai Medical Center, upgrades are also in the works to convert operating rooms and recovery rooms into ICU units.

Out of 890 total beds, the hospital normally has 144 beds devoted to intensive care. The hospital's chief operating officerDr. Jeffrey Smith says the hospital will be adding an additional 30 ICU beds.

But patient volume is down since fewer people are heading to the emergency room and seem to be abiding by CDC recommendations that they call their own doctor before going to the hospital. This could help the hospital cope more easily with a surge in COVID-19 patients. But it also represents a loss in revenue.

Most of the Cedar-Sinai's patients are covered by Medicare or private insurance although they do see a share of Medicaid patients. The hospital is financially stable but, Smith says, it will still face increased costs treating patients with coronavirus.

Right now, Smith says the hospital has plenty of ventilators available, but, in anticipation of patients with severe respiratory complications, he's working to purchase more.

When it's all added up, Smith says that converting a regular ward bed into an ICU bed costs up to $45,000 for equipment alone.

Converting beds and buying ventilators is only the beginning of increased costs for hospitals like Harbor-UCLA and Cedars-Sinai. Staffing needs go up too.

"The first thing we did was identify people who have experience caring for patients in the ICUs," says Smith. "They may not have done it for a little while, but with minimal retraining, we're able to get them up to speed." The hospital is also looking into establishing care teams where an experienced critical care nurse could oversee other nurses in the delivery of care for these patients should that need arise.

At Harbor-UCLA, Mahajan says they also plan to redeploy doctors and nurses to the ICU if need be, under the guidance of trained ICU nurses and doctors. Mahajan says caring for patients in the ICU means the need for nurse staffing more than doubles.

There are other staffing costs too, Smith says, like additional security personnel to monitor visitors and staff for symptoms.

With a dramatic increase in the number of COVID-19 patients with severe complications, staff can expect to work longer hours, overtime and weekend duty, another bump in new costs for both hospitals.

What all this adds up to for hospitals is that COVID-19 has become a financial squeeze: higher costs and less revenue. A recent telephone survey of 323 hospitals across 46 states conducted by the Office of Inspector General found that increased costs and loss of revenue were quickly depleting hospitals' cash reserves and could be disruptive to ongoing hospital operations.

Both Cedars-Sinai and Harbor-UCLA have cut back on lucrative elective procedures to make room for COVID-19 patients. At Cedars-Sinai, Smith says the loss of revenue adds up to a loss of multi-millions of dollars. And payments for care at hospital clinics have also dried up since many have been closed in order to reduce exposure to the virus.

"Every hospital in this country is suffering right now, so everyone needs help in this situation," says Rick Pollack, president and chief executive officer of theAmerican Hospital Association. The revenue is not coming in at a time when there are increased expenses to prepare for the surge. "This is the financial equation that we're trying to deal with."

The stimulus package just passed by Congress will send $100 billion to hospitals. There will be funding up front, a sort of lump sum payment "just to keep the doors open," Pollack says. There will also be additional funds to cover the increased costs of treating coronavirus patients.

Some of the money is already in the pipeline. But it's not yet clear how that money will be doled out or whether harder hit hospitals will receive more.

When it comes to targeting financial aid, details are important, saysKaryn Schwartz, senior fellow with The Henry J. Kaiser Family Foundation.

"There isn't really much, if any detail in the stimulus package about how that money is going to be spent or how it will be allocated across the country," she says. And the government will have to dole out that money pretty quickly, given the situation hospitals are in right now, she adds. "There's a lot to think about and it's tricky," she says.

For Harbor-UCLA, Mahajan says it's difficult to provide any estimate of overall cost of caring for COVID-19 patients. But, he says "it's fair to say that costs for COVID-19 are anticipated to affect our bottom line a great deal."

Smith of Cedars-Sinai says his hospital is " financially strong." Even so, the drain of millions of dollars in lost revenue in addition to the additional cost of converting beds and staff into ICU care will certainly add up. "I don't expect that we'll be able to recoup all the lost revenue or cover all the additional cost" of caring for COVID-19 patients, says Smith.

Ultimately, Pollack says more money will be needed for all hospitals with an increased volume of COVID-19 patients.

"Given the crisis we're facing, the magnitude of what we're facing, [$100 billion] sounds like a lot of money, but we have a lot of need," he says. "And we think that since we're on the front lines, we need to be at the front of the line when it comes to getting assistance from the federal government and Congress."

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Award-winning journalist Patti Neighmond is NPR's health policy correspondent. Her reports air regularly on NPR newsmagazines All Things Considered, Morning Edition, and Weekend Edition.