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Hospitals and Health Systems Face Unprecedented Financial Pressures Due to COVID-19

America’s hospitals and health systems have stepped up in heroic and unprecedented ways to meet the challenges of COVID-19. As outbreaks have occurred across the country infecting more than 1 million people, hospitals have ramped up testing efforts and are treating hundreds of thousands of Americans in an effort to save lives and minimize the virus’ spread.1 This includes establishing testing tents, adding general and intensive care unit (ICU) bed capacity, and developing COVID-19 units to isolate and treat patients with the disease while safeguarding the health of other patients and hospital staff.

These challenges have created historic financial pressures for America’s hospitals and health systems. Hospitals have cancelled non-emergency procedures, and many Americans are postponing care as they shelter in place to stop the spread of the virus. Treatment for COVID-19 has created incredible demand for certain medical equipment and supplies as the virus has disrupted supply chains, increasing the costs that hospitals face to treat COVID-19 patients. At the same time, COVID-19 has led to unprecedented job losses, giving way to a rise in the number of uninsured. And while doctors, nurses, and other health care workers have met the COVID-19 challenge with heroic efforts, many hospitals and health systems, especially those located in hotspot areas of the pandemic, are supporting them by providing essentials like child care, transportation, and in some cases, housing.

Hospitals and health systems face catastrophic financial challenges in light of the COVID-19 pandemic. The American Hospital Association (AHA) undertook four analyses to better understand and quantify these financial challenges. Including:

  • the effect of COVID-19 hospitalizations on hospital costs;

  • the effect of cancelled and forgone services, caused by COVID-19, on hospital revenue;

  • the additional costs associated with purchasing needed personal protective equipment (PPE); and

  • the costs of the additional support some hospitals are providing to their workers.

This report attempts to quantify these effects over the short-term, which are limited to the impacts over a four-month period from March 1, 2020 to June 30, 2020. Based on these analyses, the AHA estimates a total four-month financial impact of $202.6 billion in losses for America’s hospitals and health systems, or an average of $50.7 billion per month.

Healthcare Industry

The healthcare sector is one of the largest and most complex in the U.S. economy, accounting for close to a fifth of overall gross domestic product (GDP). The U.S. healthcare sector benefits from a strong system of medical research and development, in cooperation with the higher education system and the technology industry. The aging U.S. population and the advancing senescence of the Baby Boomer generation are driving ongoing strong demand in the healthcare sector.

Economically, healthcare markets are marked by a few distinct factors. Government intervention in healthcare markets and activities is pervasive, in part due to some of these economic factors. Demand for healthcare services is highly price inelastic. Consumers and producers face inherent uncertainties regarding needs, outcomes, and the costs of services. Patients, providers, and other industry players possess widely asymmetric information and principal-agent problems are ubiquitous. Major barriers to entry exist in the form of professional licensure, regulation, intellectual property protections, specialized expertise, research and development costs, and natural economies of scale. Consumption (or non-consumption) and production of medical services can involve significant externalities, particularly regarding infectious disease. Transactions costs are high in both the provision of care and the coordination of care. 

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osha safety rules

Safe Work Practices Safe work practices are types of administrative controls that include procedures for safe and proper work used to reduce the duration, frequency, or intensity of exposure to a hazard. Examples of safe work practices for SARS-CoV-2 include:

 

■ Providing resources and a work environment that promotes personal hygiene. For example, provide tissues, no-touch trash cans, hand soap, alcohol-based hand rubs containing at least 60 percent alcohol, disinfectants, and disposable towels for workers to clean their work surfaces.

 

■ Requiring regular hand washing or using of alcohol-based hand rubs. Workers should always wash hands when they are visibly soiled and after removing any PPE.

 

■ Post handwashing signs in restrooms. Personal Protective Equipment (PPE) While engineering and administrative controls are considered more effective in minimizing exposure to SARS-CoV-2, PPE may also be needed to prevent certain exposures. While correctly using PPE can help prevent some exposures, it should not take the place of other prevention strategies. Examples of PPE include: gloves, goggles, face shields, face masks, and respiratory protection, when appropriate. During an outbreak of an infectious disease, such as COVID-19, recommendations for PPE specific to occupations or job tasks may change depending on geographic location, updated risk assessments for workers, and information on PPE effectiveness in preventing the spread of COVID-19. Employers should check the OSHA and CDC websites regularly for updates about recommended PPE.

 

All types of PPE must be:

■ Selected based upon the hazard to the worker.

■ Properly fitted and periodically refitted, as applicable (e.g., respirators). GUIDANCE ON PREPARING WORKPLACES FOR COVID-19 1 5

■ Consistently and properly worn when required.

■ Regularly inspected, maintained, and replaced, as necessary.

■ Properly removed, cleaned, and stored or disposed of, as applicable, to avoid contamination of self, others, or the environment. Employers are obligated to provide their workers with PPE needed to keep them safe while performing their jobs. The types of PPE required during a COVID-19 outbreak will be based on the risk of being infected with SARS-CoV-2 while working and job tasks that may lead to exposure. Workers, including those who work within 6 feet of patients known to be, or suspected of being, infected with SARS-CoV-2 and those performing aerosol-generating procedures, need to use respirators.

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