CARES and Good Stewardship

Political leanings aside, you have to marvel at the CARES Act passing with a 96–0 vote. On Monday, March 23, the federal government decided to infuse the economy with $2.2 trillion that will rush to the aid of American households and businesses. It includes several provisions that bolster various institutions, from education to the airlines, small businesses to state municipalities. 

One of the headlined provisions of the bill is a $100B hospital and health system lifeline. Though the stimulus package is designed to help save businesses and aid the healthcare industry, I worry that the losses health systems expect as a result of COVID-19 far surpass the provisions in this package. If that is true, the Act poses a real threat to perceptions of hospitals and health systems, and the strength of their brands. People may assume the problem is solved, and that is far from true. 

I’m not here to diminish the value of $100B. It’s an important start, and it does address some of the most pressing issues. For example:

  • It opens up beds in long-term care hospitals and inpatient rehabilitation hospitals, which will hopefully help alleviate the massive lack of open beds in hospitals right now. 
  • It also makes home health services more available to many, by allowing PAs, NPs, and clinical nurse specialists to order home health services, rather than just physicians. 
  • It delivers much-needed cash to hospitals and health systems, beginning to cover non-reimbursable expenses attributable to COVID-19. 

Yet industry professionals know $100B is a drop in the bucket compared to the huge losses that will be generated by the 20-35% revenue hit most hospitals expect this year as a result of skipping elective surgeries in service of managing this crisis. The math isn’t hard, and it’s very compelling. 

  • There are about 1M hospital beds in the U.S. 
  • If you distribute $100B equally, that’s about $100,000 per bed. 
  • For a 1,000-bed health system, that’s $100M total.
  • For a health system that does $2B in inpatient revenue (which is relatively healthy), that’s about 5% of their normal annual revenue.
  • For a larger health system like UPMC or NewYork-Presbyterian or Henry Ford, that’s 1% — or even less. 

The CARES Act aid of 1-5% of most health systems’ inpatient revenue pales in comparison to a 20-35% annual revenue hit. These hand-over-fist losses are already happening, and will extend over the coming months and beyond. And that may be okay — because more federal aid may be coming for health systems. 

The problem is that $100B is an unfathomable amount of money for most people. The general public is tuned in, and health systems run a real risk of being seen as bad stewards when they tear through that funding in short order. What happens when you’re still short on PPE? Or when patients can’t get ventilators? Or when physicians speak out about adverse conditions? People need to know that the CARES Act was only the first step to address the immediate needs of health systems today and their sustainability into the future. 

In my last article, I talked about how we tend to expect massive charity care from hospitals and health systems in the midst of a public health crisis like this, and I do believe the onset of this pandemic starts a “war time” that will yield winners and losers. Some systems will come out of this crisis with stronger brands than ever because they stood for the health of their communities no matter the cost, yet now they’re fighting for their financial sustainability. Those same systems may be able to leverage that brand equity to rebuild surgical volume and even grow market share to levels way above pre-COVID-19 market share. Others may use that brand equity to force better managed care rates from payors to offset COVID-19 losses. Some health systems may do both. 

Before COVID-19, healthcare costs and perceptions of good stewardship were already emerging threats to health system brand equity, but this crisis has brought that threat right to our doorstep. The stakes have never been higher for health system communicators and marketers. 

April 1, 2020
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