The ability to accurately measure costs of care and use this data to bend the healthcare cost curve is a vital factor for hospitals’ survival — now and in a post-COVID-19 world.
When it comes to understanding the total cost of care during COVID-19, the world has changed.
Today, many hospitals have canceled elective procedures to save resources for patients suffering from COVID-19 and others with urgent care needs. Meanwhile, the costs themselves are higher.
“The expenses for COVID-19 cases are going to be considerably higher than what your average case would be simply because of the need for supplies, the scarcity of supplies available and the need for additional resources to treat patients, including labor,” said Chad Mulvany, director of healthcare financial practices, perspectives and analysis for HFMA.
Even with a 20% increase in Medicare payment for COVID-19 discharges under the CARES Act passed by Congress, a Strata Decision Technology analysis projects an average loss of about $1,200 per case and up to $6,000 to $8,000 per case for some hospital systems, depending on their payer mix.
Meanwhile, researchers estimate that 90% of hospitals that cancel all elective procedures will soon begin to experience negative profit margins from COVID-19 cases.
Although the CARES Act provides $100 billion in funding for hospitals and other healthcare organizations responding to the coronavirus pandemic — which averages out to $108,000 per hospital bed, according to a Kaiser Family Foundation analysis — the degree to which a hospital can access those funds could come down to its ability to demonstrate COVID-19 costs of care.
As requests for funding are reviewed, those hospitals that can pull together cost data to justify the funds they are requesting will be ahead of the curve, Mulvany said.
More than ever, healthcare finance teams need to be nimble, facile and skilled in their use of cost data to model the impact of COVID-19 on their organization — now and in the months ahead — and make the right decisions for their future.
Top-of-mind cost concerns for healthcare leaders
A recent survey by HFMA and Strata found that while 85% of health systems and 57% of hospitals and medical centers have a cost accounting system, most do not have strong proficiency in using cost data to reduce total cost of care.
Just under 44% of all organizations surveyed consider themselves “moderately effective” at getting clinicians and physicians to use cost data to reduce care costs, while only 7% considered their cost data effectiveness to be “highly effective.” Health systems rated their ability to engage clinicians and physicians around cost data slightly higher than hospitals (see the exhibit below for responses from these two large subsets of the respondents).