Protecting Public Health and Preserving the Financial Viability of North Carolina’s Critical Health Care Facilities during Infectious Disease Outbreaks

Hospitals represent a critical line of defense for reducing the impacts of COVID-19, which has killed more than 480,000 Americans as of February 14th, 2020. While hospitals’ primary emphasis will always be on ensuring sufficient health-related resource capacity to serve COVID-19 patients (e.g., ICU beds, ventilators), the impacts of the pandemic on the financial viability of hospitals has also become a critical concern. In an effort to ensure adequate hospital capacity to handle a potential surge of COVID-19 patients in April and May 2020, many hospitals reduced or cancelled elective and non-emergency inpatient surgical procedures which account for a significant portion of their revenues. While this was a sensible precautionary measure during a time when much about COVID-19 was unknown, social measures (e.g., social distancing, masks) reduced the severity of the predicted surge such that a significant fraction of the capacity made available by these cancellations went unused, with devastating financial impacts. In April, the North Carolina Hospital Association estimated that hospitals across North Carolina were losing over $1 Billion per month due to reduced revenues, largely attributed to the reduction in elective surgeries. A more carefully calibrated determination of when and how much capacity should be made available during COVID-19 (or similar infectious disease) outbreaks is needed. This work involves an analysis of data collected over the period March 2020-Janaury 2021 that reveals connections and tradeoffs across increases in COVID-19 hospital admissions, reductions in elective procedures, hospital capacity and hospital revenues for the Research Triangle hospital system. These suggest that the halt to elective and non-emergency inpatient procedures in March-May 2020, combined with a reduction in emergency room procedures (which were not restricted) led to a reduction in daily hospital system revenues of as much as 40% relative to expectations, and a cumulative loss of 4.7% of annual gross revenues for inpatient procedures, which translates to annual losses on the order of $600 million. Over the entire period March 2020 through January 2021, the total system losses due to reduced inpatient procedures assumed to be related to the pandemic were on the order of 6.5% of gross revenues from inpatient procedures, or about $835 million. Following the analysis of observed data, a simulation model that couples COVID-19 community transmission with patient flow dynamics and billing records within the Research Triangle system was developed. The model links community transmission, COVID-19 and non-COVID-19 hospital admissions, and actions to cancel elective and non-emergency procedures to resource utilization (e.g., ICU beds, ventilators) and revenues within the hospital system, enabling an analysis of the financial and healthcare tradeoffs, as well as how changes in hospital decisions and societal policies intended to reduce community transmission (e.g., mask mandates, social distancing measures) can affect these outcomes. Simulation results suggest that the Research Triangle hospital system alone could lose over $1 billion in gross revenue during the period March 2020 – May 2021. Estimated revenue losses are, however, very sensitive to the effective reproductive rate (Re) through the February-May 2021 period. If the effective reproductive rate during this period return to the higher levels observed regionally in November – December 2020, the system may again cancel elective and non-