Why Is the Health Care System Going Broke During a Pandemic?

You might think that a pandemic would lead to larger revenues for the health care industry. But one of the stranger aspects of the lockdown/shelter-in-place reaction to the pandemic is that in order to help society address a severe health problem, it seemed necessary to drive the health care industry into deep financial hardship. Dhruv Khullar, Amelia M. Bond, and William L. Schpero discuss "
COVID-19 and the Financial Health of US Hospitals" in the May 4 issue of the Journal of the American Medical Association. In pretzel-shaped logic, they write:

To limit the spread of disease and create additional inpatient capacity and staffing, many hospitals are closing outpatient departments and postponing or canceling elective visits and procedures. These changes, while needed to respond to the COVID-19 pandemic, potentially threaten the financial viability of hospitals, especially those with preexisting financial challenges and those heavily reliant on revenue from outpatient and elective services.

Let's unpack that for a moment. Two goals are listed here. Focus first on the goal of seeking to "create additional inpatient capacity and staffing." As it turned out, closing outpatient departments and canceling elective visits was not actually "needed to respond to the COVID-19 pandemic." Yes, there were some early predictions that it might be needed. But in fact, it wasn't. The other goal is "to limit the spread of disease." I'm certainly no expert here. But it seems to me that hospitals should be pretty good at limiting the spread of disease--it might even be called one of their core competencies. And at least to me, it's not easy to follow the logic that a hospital should not treat outpatients and must cancel elective procedures because of fear of spreading the same disease which the hospital expects will fill up all its bedspace.

A May 2020 report from the American Hospital Association, "Hospitals and Health Systems Face Unprecedented Financial Pressures Due to COVID-19," describes the situation this way (footnotes omitted):

To increase personal and public safety across the country while conserving PPE, hospitals moved to cancel nonemergency procedures. At the same time, many Americans have forgone care, including primary care and other specialty care visits. On March 18, the Centers for Medicare & Medicaid Services (CMS) recommended that most elective surgeries and non-essential medical, surgical and dental procedures be cancelled or delayed during the COVID-19 outbreak. Since then, several governors mandated cancellation of non-essential services in their state.

These measures have resulted in adjusted discharges – a measure that accounts for both inpatient and outpatient services – decreasing by 13% from the previous year Health care providers have raised concerns that patients are forgoing important care, such as chronic disease management, which can further jeopardize their health. An additional consequence of these factors has been steep reductions in revenue for all hospitals and health systems across the country. ... This report attempts to quantify these effects over the short-term, which are limited to the impacts over a four-month period from March 1, 2020 to June 30, 2020. Based on these analyses, the AHA estimates a total four-month financial impact of $202.6 billion in losses for America’s hospitals and health systems, or an average of $50.7 billion per month.

Thus, in order to prepare the US hospital system for an outbreak of coronavirus, we made policy decisions with the effect of cutting immediate revenues to that same hospital system by $50 billion per month in the last four months. 

Of course, it's not just the financial cost. Health care is not being delivered to those who would have been outpatients. "Elective" surgery doesn't mean "unnecessary" surgery, only that the timing of that surgery can be adjusted to some extent. Primary care patients and checkups have taken a hit, too. A potential overload of coronavirus cases was prioritized over actual immediate patients. In addition, the financial losses don't only apply to hospitals. For example, nursing homes and care facilities that help people rehabilitate after surgery are taking a hit, too.

When this situation is pointed out, those writing from the health care profession seem determined to defend the policy. We can revisit some other some the interactions of good intentions and uncertain information, and what the author Saul Bellow used to call the Good Intentions Paving Company.
But imposing large financial costs on US health care system and on the health of other patients out of a fear of a coronavirus overload has turned out to be a mistake, and you have to acknowledge mistakes to learn from them.