Is It Time to Start Bracing for the Great Covid Depression?

April 11, 2020

Healthcare executives in all sectors are beginning to think about how the economic consequences of COVID-19 are going to affect their organizations and lines of business. 

Healthcare executives in all sectors are beginning to think about how the economic consequences of COVID-19 are going to affect their organizations and lines of business. 

Just one example: How long will the spike in unemployment last and will enrollment in ACA exchange plans and Medicaid managed care plans ballon while the number of Americans covered by employer-based insurance shrink?  If that shift takes place - odds are that will to some degree given that more than 17 million Americans have filed for unemployment in the past month - how long will it last? Will the post-COVID-19 insurance market look dramatically different from the one we had prior mid-March 2020? 

Meanwhile, hospitals and other providers are coping with the massive cancellation of routine medical care. We posted an item early this week about what is happening to cardiology practices

Related: Cardiology Organizations Bracing For Major Revenue Drop Because of COVID-19

HHS announced this week the posthaste distribution of $30 billion of the CARES Act $100 billion earmarked for hospitals and other providers. As the HHS announcement makes clear, this money is an outright payment not a loan that has to be paid back like the earlier accelerated and advance  payment program. A provider’s share of the this $30 billion depends on its Medicare FFS payments in 2019. More specifically, it is based on the provider’s fraction of the $484 billion in total FFS payments in 2019. The HHS announcement gave the hypothetical example of a community hospital that billed for $121 million FFS in 2019. Put that $121 million over $484 billion and you get 0.00025. Multiple that by $30 billion and you get $7.5 million, the payment to the hypothetical community hospital.

Others can decide whether that is a drop in the bucket or whether every bit helps.

Interestingly, HHS said attached a no-surprise-billing string to the money. The announcement says providers must agree not to seek to out-of-network payments from COVID-19 payments that are greater than what patients would have paid in-network. Of course, many insurers have announced that they are waiving all cost sharing related to COVID-19 testing and treatment so, at least with respect to COVID-19, surprise billing may not be an issue right now.

Meanwhile, the always-worth-reading Adam Fein made some predictions this week - on Tuesday, to be precise - about the COVID-19 effect on the health care sector.

Hospitals. Fein noted that revenues are cratering , and he is not confident that spending on COVID-19 treatment will offset the overall downturn on other services.

Prescriptions. Fein paints a pretty bleak picture if you work in the sector: Fewer prescriptions, fewer launches of new drugs, delay and cancellation of clinical trials. Optimists might point to COVID-19 treatments and a vaccine - or vaccines, plural - as offsetting factors, he notes. (And say they are effect, a twofer because might the overall economy spring back faster?)

Overall. As Fein notes, American healthcare utilization dropped from 2009–2011 after the housing bubble popped and the economy went into tailspin. Fein didn't write this but it is pretty clear that while some demand for healthcare services is relativley inelastic - people are still going to get cancer, people with diabetes are still going to need monitored and probably take medications to control the disease - not all of it is.