In addition to the damage it’s done to those who have been infected, COVID-19 has taken a financial toll on institutions working on the frontline of care delivery.
By Lyndon Stambler
UCLA Health and its doctors, nurses and staff routinely train for events like earthquakes, fires and plane crashes. What the health system could not fully train for was the financial impact of the COVID-19 pandemic.
To prepare for the arrival of COVID-19 in Southern California, and the possible surge of patients coming to UCLA’s hospitals, the health system began early on to make a number of significant changes to its operations. While necessary to address the crisis, those changes carried with them a heavy financial burden.
“In the first few weeks of March alone, we canceled 6,000 non-emergency surgeries or procedures,” says Johnese Spisso, MPA, president of UCLA Health and CEO of UCLA Hospital System. “Our hospitals, which usually are at 100 percent capacity, quickly reduced to about 50 percent capacity” as the system made more space available for a possible surge of COVID-19 patients, “and our ambulatory clinics also dropped to about 50 percent capacity,” she says. At the same time, outpatient visits to physicians slumped, as fearful patients postponed routine care. Patients suffering medical emergencies stayed away from the ERs.
That trend was felt by hospitals throughout the state. In a report in June, “The Financial Impact of COVID-19 on California Hospitals,” the California Health Care Foundation noted that before the pandemic, the state’s hospitals collectively averaged nearly 257,000 inpatient and 4 million outpatient visits each month. “As COVID-19 containment efforts took hold, outpatient services decreased by more than 50 percent in the 60-day period after the statewide shelter-in-place order went into effect. Emergency departments, which generate approximately 60 percent of all inpatient admissions in California, dropped by 40-to-60 percent in the same two-month period,” the report noted.
“One day, for the first time in my 39 years working at UCLA, there were no patients in the emergency department,” recalls John C. Mazziotta, MD (RES ’81, FEL ’83), PhD, vice chancellor for UCLA Health Sciences and CEO of UCLA Health. “It was a Sunday morning. I’d never seen that before.”
For a health system that is used to its hospitals operating at 100 percent or more capacity, the financial impact was enormous. Paul Staton, senior vice president of finance and chief financial officer of UCLA Health, has been tallying the results for the fiscal year that ended June 30. He says that from March — when COVID-19 was declared a national emergency and UCLA Health began making its preparations — through the end of June, UCLA’s hospitals saw a drop of $180 million in revenue, and physicians saw a $90 million drop, a total decline of $270 million. At the same time, costs for additional supplies and equipment jumped by $20 million.
“This is something no one saw coming,” Staton says. “It’s been like a category 5 hurricane all over the world that doesn’t go away.”
Unlike other disasters for which UCLA Health has prepared, the Covid-19 pandemic was, by its very nature, much more difficult. Rather than most of the trauma being at the beginning, “this has been like a mass casualty event that evolves in slow motion in the reverse direction and keeps getting worse until it peaks,” Dr. Mazziotta says.
UCLA Health was able to manage all the COVID-19 patients that presented and didn’t experience a large surge, but the loss in revenue “isn’t sustainable,” Spisso says. “We are anxious to return to our normal business of health care so we can really meet our mission for the community.”
UCLA joined together with five other hospital systems in the Los Angeles region to get the message out to the public. “We worked together as a hospital community to educate the public and to tell them it’s time to come back for the health care they have put on pause,” Spisso says. “We have been especially concerned about the reduction we saw even in our emergency departments in patients coming for treatment of heart attacks and strokes. We know that Covid-19 did nothing to cure those, and so we have been very concerned that people weren’t coming for the care that’s needed.”
Patients responded. By late July, UCLA Health was back to 90-to-95 percent of its pre-Covid-19 volume. “I haven’t seen any other drops in any of our volumes,” Staton says. “I think people are getting comfortable again about coming in.”
A combination of government grants and zero-interest loans has helped UCLA Health to offset some of its revenue decline, as well as covered significant increases in costs associated with the pandemic such as procuring — and sustaining — essential personal protective equipment (PPE). “We went from using, on a typical day, about 4,000 surgical or procedural masks to using 36,000,” Dr. Mazziotta says. “Until now, you couldn’t really anticipate an increase of that magnitude.”
The community also stepped in to help support UCLA Health and its caregivers. Whether it was material donations of PPE or significant financial gifts, the generosity of donors was essential to provide necessary resources to safely engage with patients and protect staff working on the frontline.
Even as there’s been a resurgence of COVID-19 cases since the initial wave, UCLA Health has done well to manage its fiscal affairs. Even so, continuing uncertainties keep Staton awake at night. What if there is a confluence of the seasonal flu and a second wave of COVID-19 in the fall, for example. That, Staton says, could be a “double-whammy” for revenues and costs. In addition, the large number of people who have become unemployed during the pandemic could mean more uninsured patients arriving at UCLA’s hospitals and clinics.
Needless to say, it will take time to recoup hundreds of millions of dollars in losses. “You can’t ever really recover fully from this,” Staton says. “Patients didn’t come in for care, and even though we can now reschedule them, it’s not like we are able to make up that lost revenue.”
Still, Staton is heartened by how everyone has pulled together and performed under pressure. “Throughout the entire system — operations, finance, everywhere — everyone pitched in and helped tremendously,” he says.
Lyndon Stambler is a freelance writer and associate professor of journalism at Santa Monica College.
Johnese Spisso, MPA
John C. Mazziotta, MD