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Early data show declines in overall healthcare spending notwithstanding estimated costs related to COVID-19

Senior Consultant, Freedman HealthCare, LLC

Mary Jo Condon, MPPA, sees information and collaboration as the foundation for improving our nation’s healthcare system.

While the cost of treating COVID-19 will be significant, particularly for patients requiring hospitalization, the lost revenue from delayed or cancelled elective procedures, diagnostic tests and routine office visits will likely lead to lower total healthcare spending in the immediate future, according to early data emerging from the first weeks of the COVID-19 pandemic.

FAIR Health, a nonprofit that manages a large database of commercial and Medicare claims data, released two reports recently. The first report, The Projected Economic Impact of the COVID-19 Pandemic on the US Health System, was released in March. It projected the total impact COVID-19 could have on the U.S. healthcare system based on the potential services, costs, and number and mix of patients that could be involved. It found the total projected costs for all hospitalized COVID-19 patients could range from an estimated $139 billion to $558 billion, depending on the incidence rate and severity of the infection in the US population. The second FAIR Health report, Illuminating the Impact of COVID-19 on Hospitals and Health System, was released last week. It had a very different purpose and the data told a very different story. The second report looked at healthcare utilization and spending within hospitals, both nationally and in the Northeast, in the first quarter of 2020 compared to the first quarter of 2019. This report suggests healthcare utilization declined in certain sized hospitals and health systems in 2020, particularly in the Northeast, likely due to a “freeze” imposed on certain non-emergent services and patients postponing or canceling a wide range of medical visits, tests and procedures.

To develop the estimates in the first report, FAIR Health combined several analyses. FAIR Health used inpatient ICD-10 procedure codes and revenue codes associated with influenza and pneumonia, and DRGs associated with pneumonia to estimate the cost of a COVID-19 inpatient hospitalization. It combined that data on cost with expert projections of the percentage of Americans who may become infected with the novel coronavirus, seek medical care for COVID-19, and be hospitalized. FAIR Health also used estimates from the Centers for Disease Control and Prevention of the age-range distribution of hospitalized COVID-19 patients, estimates of Medicare and Medicaid spending for similar procedures, and estimates of the proportion of the population that is covered by commercial insurance, Medicare, and Medicaid.

The second report compared estimated imputed allowed amounts on private insurance claims resulting from services provided at facilities in the first quarter of 2020 with the first quarter of 2019. FAIR Health also analyzed changes in estimated imputed allowed amounts reimbursed to facilities by payors as well as changes in discharge volume, diagnoses and procedures. As expected, most of the changes were seen in the month of March, in particular in the third week, as the number of COVID-19 cases grew dramatically and other procedures were curtailed.  The impact was greatest among large facilities in the Northeast. For example, in large facilities, average per-facility revenues decreased 16 percent nationally and 26 percent in the Northeast.

It’s important to note FAIR Health made some adjustments to develop more accurate comparisons. It adjusted the 2019 data by the Consumer Price Index to reflect inflation and it limited the analysis to claims submitted until April 30th to ensure the data would be subject to the same incurred but not reported (IBNR) conditions as the data retrieved for the corresponding time period in 2020.

Robin Gelburd, President of FAIR Health, noted that: “As responsible stewards of this rich, independent claims collection, FAIR Health seeks to bring greater visibility into this unprecedented pandemic by making studies of this nature freely available to all stakeholders in the healthcare sector.”

For more information or for support developing similar analyses, contact Mary Jo Condon at mcondon@freedmanhealthcare.com.

 

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