Will COVID Stave Off Hospital Bankruptcies?

Published On June 01, 2020

Washington’s Astria Regional Medical Center is getting a second chance thanks to the coronavirus pandemic, shares Becker’s Hospital Review. The 366-bed St. Vincent Medical Center in Los Angeles is experiencing a similar rebirth after its Chapter 11 bankruptcy and January closing.

COVID-19 is taxing local healthcare systems causing people to turn to shuttered hospitals. This, in turn, means these hospitals need to quickly ramp up capacity in the face of surging hospitalizations. Which leads to this question: Does this mean an outbreak could resurrect closed and struggling hospitals across the country? The answer is the same as it is for much of healthcare — it’s complicated but likely state-specific.

A History of Hospital Closures

In 2019, we racked up 29 hospital closures across the country. Brought on by a mix of tight margins, a shifting payer landscape and decreasing patient volumes, closures have been common in recent years, hitting rural areas the hardest. In the last decade, 120 rural hospitals have shut their doors, with 31 states seeing at least one rural facility disappear from the healthcare ecosystem, according to Becker’s Hospital Review.

The Chartis Center for Rural Health reported that almost half of rural hospitals were operating in the red prior to COVID-19, with an alarming rate of closures, according to NPR. These closures leave a wake of unemployment and worry, just as the pandemic is finding its way to less densely populated areas.

While one might think this tragic but all too real situation might create additional throughput in rural healthcare facilities , healthcare is ultimately a local game. COVID-19 has been a large and medium-sized city problem, at least for now; closed hospitals need to be very close to outbreak peaks to be of any help. But this doesn’t mean small towns are sitting safely on excess beds in the likely case that the global crisis knocks on their door, shares CNBC. They might be in a more precarious position.

Will States Take Action?

State governments are generally the driving force behind hospital reopenings. As Becker Hospital Review points out, if you look at the states that have decided to reboot their defunct hospitals, you might notice a trend: California, Illinois, Ohio, Pennsylvania and Washington are all Medicaid expansion states, so the willingness to reopen shuttered facilities might pivot on a more proactive approach to public health and healthcare access.

Does this mean that cities and towns that have experienced closures are out of luck, just as COVID-19 is reaching them? Not at all, but it does show that the necessary facilities and equipment might take longer to ramp up for the country’s most vulnerable areas.

COVID: Another Loop On A Financial Roller Coaster Healthcare Providers Can’t Get Off

Regardless of location, the rebirth of these hospitals might be short-lived.

The billions of dollars that are being pumped into these facilities is short term and artificial, notes the Kaiser Family Foundation. Hospitals have been fighting roller-coaster volumes since the beginning of this pandemic, and that’s not going to stop any time soon. The sharp decline in elective procedures brought on by both government recommendations and public safety concerns is expected to end once the virus is under control. For hospitals that were already profitable, this is a return to normal, but for facilities that were struggling with profitability pre-pandemic, that normalcy means facing the same financial pressures that led to their closings in the first place. Many hospitals, rural ones especially, were already functioning with as little as 30 days worth of cash on hand, some with less. That dynamic doesn’t disappear in a post-COVID world.

Could a pandemic mean a comeback for shuttered hospitals? Yes, but likely only in the short term. As big a challenge as COVID-19 has been, it’s only a blip on the radar of the hospital profitability problem — a problem that will be alive and well long after we conquer this mountain.