Shaky U.S. Hospitals Risk Bankruptcy in Latest Covid Wave
Comment of the Day

October 15 2020

Commentary by Eoin Treacy

Shaky U.S. Hospitals Risk Bankruptcy in Latest Covid Wave

This article by Lauren Coleman-Lochner for Bloomberg may be of interest to subscribers. Here is a section:

The AHA has estimated the pandemic will cost U.S. hospitals more than $323 billion through the end of this year. U.S. hospital revenue totaled about $1.1 trillion in 2018, according to the most recent AHA data available. The industry group is asking Congress for an additional $100 billion and full forgiveness of loans made under Medicare’s accelerated payment program, among other requests for relief.

As many as half of hospitals could be losing money by year end, Wesolowski said, citing a report it released in July from Kaufman, Hall and Associates. That’s up from about a third that were operating at a loss ahead of the pandemic.

More than three dozen hospitals have already entered bankruptcy this year, adding to a similar number last year, according to data compiled by Bloomberg. More than a dozen in rural areas have also shut their doors, according to the Cecil G. Sheps Center for Health Services Research at the University of North Carolina. The AHA put the total U.S. hospital count at 6,146 in its most recent report, a decrease of 64 from the previous year.

The financial pain has flowed through to Wall Street. Many of the hospitals that entered bankruptcy this year were part of Quorum Health Corp.’s Chapter 11 filing in April. Quorum’s 24 hospitals and other facilities struggled under the demands of treating coronavirus patients. In late June, a judge approved the company’s exit plan, which wiped out shareholders and handed the chain to creditors.

Eoin Treacy's view

Hospitals are on the frontline of dealing with the pandemic but also suffer from the less remarked upon consequences of damaging consumer confidence. People have simply stopped going to the doctor.

I’ve written about this previously but the point is worth repeating. We usually have to wait at least six weeks to get a bundle of appointments together so all four of us can get our annual physicals. This year there was no wait. The hospital was deserted and appeared to be running with a lot fewer service people.

The cost of dealing with pandemic can be dealt with. The cost of lost income and changing consumer behaviour is a much bigger concern. Elective procedures are extremely lucrative for hospitals. It’s questionable whether they can survive without them.

This helps to emphasise how much assistance various parts of the economy still require. The politicisation of the fiscal stimulus in the USA obviously represents a clear pressure point for at-risk businesses. If the economy has to wait until January for a stimulus package that is going to have repercussions for highly leveraged people-facing businesses.

The stock market is not currently pricing in that risk because most investors do not believe it will take three months to agree a deal.

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