Hospital Revenue Loss from Delayed Elective Surgeries
More Than the CARES Act Needed to Recover
Hospitals lost more than $20 billion in revenue when the pandemic led to an unprecedented nationwide shutdown in elective surgical procedures from March to May 2020. In a new Annals of Surgery study, we quantified this impact and analyzed the potential implications of a widespread interruption in elective surgeries for patients, health disparities, and the financial health of hospitals.
In March 2020, several states and the American College of Surgeons recommended that hospitals thoughtfully review scheduled elective surgeries and consider delaying them to preserve critical care resources and minimize patient exposure to COVID-19. “Elective” surgery includes cosmetic as well as time-sensitive procedures—such as screenings, biopsies, hernia repairs, and valve replacements—in which delays can worsen morbidity and mortality.
Using the latest available data (2016-2017) from the Nationwide Inpatient Sample, we forecast the range of monthly demand for, and revenue from, elective surgical cases in adult U.S. hospitals from March-May 2020. We also used industry surveys to estimate timelines to clear the backlog of delayed cases, based on the operating capacity of hospitals before the pandemic.
We found that hospitals lost nearly $22.3 billion in revenue nationally due to the cancellation of elective surgeries. The time it would take to clear the backlog varied by operating capacity of hospitals before and after the pandemic. Across the scenarios we modeled, that recovery time ranged from 4 to 164 months. In the typical (median) case, a hospital that was operating at 75% operating capacity before the pandemic and 45% after it would need 12-22 months to clear its backlog.
As elective surgeries generate high profit margins for hospitals, all U.S. hospitals faced additional financial risk when these procedures were shut down. The 2020 CARES Act—a policy to support the cost of COVID care and reimburse lost revenue—initially disbursed funds to U.S. hospitals according to a formula based on Medicare fee-for-service billings. However, this approach disadvantaged hospitals that disproportionately treat uninsured and/or publicly insured patients.
Hospitals already at the brink of financial failure—more likely urban, non-teaching, and rural—were expected to be worse-off in comparison to urban, teaching hospitals. Additional CARES Act payments to hospitals in regions with high COVID patient volumes failed to address financial losses among hospitals in regions with low COVID patient volumes that were also required to cease elective operations. Given the prolonged nature of the pandemic, regional hospital closings and changes in how patients seek health care could interact to worsen pre-existing geographic disparities.
As the pandemic evolves, efforts to mitigate the elective surgery case backlog safely and efficiently are critical. Strategies to alleviate the predicted revenue loss from elective surgery cessation will vary based on regional demand and a hospital’s ability to ramp up its capacity to clear the backlog.
One early response to financial pressures among hospitals was to furlough workers. However, our model suggests that this may be risky in the long run. Hospitals that were operating far below 100% capacity before the pandemic may be able to hasten recovery by rapidly increasing their elective surgery case volume. In contrast, hospitals that had already been operating at high capacity will have the least room to account for missed volume and must consider alternative strategies. Hiring additional staff, scheduling cases on nights and weekends, pursuing mergers or acquisitions, and accelerating infrastructure investments will increase a hospital’s capacity and has the potential to reduce recovery time from years to months.
Current policies such as the CARES Act inadequately buffer the losses that all health care systems experience nationwide. During and after the pandemic, it is critical to generate data and understand shifting behaviors among patients and health systems to avoid unintended long-term financial and health care risks.
The study, The Cost of Quarantine: Projecting the Financial Impact of Canceled Elective Surgery on the Nation’s Hospitals, was published in the Annals of Surgery in January 2021. Authors include Sourav K. Bose, Serena Dasani, Sanford E. Roberts, Chris Wirtalla, Ronald P. DeMatteo, Gerard M. Doherty, and Rachel R. Kelz.