key: cord-0047967-eei9xln6
authors: Terwiesch, Christian; Mahoney, Kevin B.; Volpp, Kevin G.
title: Payment for Staying Empty? Reimbursing Hospitals for Covid-19 Readiness
date: 2020-06-10
journal: NEJM Catal Innov Care Deliv
DOI: 10.1056/cat.20.0232
sha: ac04118e9d12bd9052bdac8230ca973761d341b9
doc_id: 47967
cord_uid: eei9xln6

In areas with few cases, must hospital systems pay for unused added infrastructure and foregone revenue from suspended services?

available and could have continued to support regular clinical operations, while in New York City hospital and ICU capacity were strained to the breaking point.

An increasing number of news articles are highlighting that hospitals in areas with fewer Covid-19 cases may lose 20-40% of their revenues from cancelling procedures and remaining largely empty, meaning dollar losses in the hundreds of millions to billions for many health systems.1 These foregone revenues raise a simple question: should health care systems be compensated for reserving capacity for a public health emergency, even if that capacity was never used? Or, put differently, should hospitals be paid for work that they never performed?

Paying for preparedness makes more sense than some people might assume. Nobody would propose not paying local fire fighters for days on which there are no fires. Being ready and having the spare capacity to respond to emergencies when needed is clearly essential.

In the medical community, there exists an interesting European precedent for paying providers for being available. In a high profile court case in 2003, the European Court of Justice declared that Dr Norbert Jaeger, a physician in the city of Kiel, Germany, had to be compensated for his time at the hospital even when sleeping.2 In the eyes of the hospital, there was no need to compensate Dr. Jaeger for the time he spent sleeping. In the eyes of the court, however, Dr Jaeger provided a valuable service by being in the hospital ready to work even while he was not actively working.

The concept of paying for preparedness also exists in other industries. In the energy sector, for example, utility companies face substantial uncertainty about how much electricity will be demanded and how much electricity can be produced. To avoid blackouts, some power plants need to act as back-up capacity, being available to be put online in case of electricity shortages. Many countries compensate the owners of these power plants, even in cases when their capacity is not utilized.

As a society, most of us would argue that hospitals did the right thing when they prepared for Covid-19 by shutting down most of their non-Covid-19 clinical operations. Who among us would want to live in an area which as the pandemic approached had no hospital beds available? In some states and cities, government mandates required hospitals to cancel all elective procedures. CMS urged hospitals to cancel or postpone all but the highest acuity visits and procedures.3 Given this, it seems unfair for hospitals alone to foot the bill for freeing up capacity. Who should be shouldering the bill?

Providing surge capacity in the context of a pandemic is a public good and government mandates were appropriate, given the unpredictability and the observation that significant increases in the number of Covid-19 hospitalizations in places like Italy led to poor outcomes in overwhelmed health systems. The government should step in and make health systems whole for whatever health insurers don't pay. While we agree that health insurers who have collected premiums as usual and have had their expenses reduced significantly through the cancellation of procedures shouldn't benefit financially,4 self-insured employers typically use insurers as third-party administrators and insurers thus do not get paid for procedures that do not happen. The initial portions of the $100 billion that the federal government allocated to hospitals in the Coronavirus Aid, Relief, and Economic Security (CARES) Act were distributed based on Medicare fee-for-service revenues in 2019, an allocation that a lot of hospitals have considered unfair.5 Going forward, allocating based on the Covid-19-attributed burden -both in terms of required or recommended unused capacity and in caring for under-reimbursed Covid-19 disease -would make more sense.

Our president has invoked the Defense Production Act. Many leaders around the world have used military rhetoric when referring to the Covid-19 pandemic. If we think of this pandemic as a battle, our troops are the front-line health care workers. Would anybody propose that we not pay our military during peacetime when not actively engaged in combat? Appropriately compensating health care providers for providing a 'buffer' of excess supply is critical, as our battle against Covid-19 may rage for 18 months or longer and may ebb and flow in different geographic areas. While health care systems around the country rose to the occasion with this first wave by clearing out their hospitals and incurring significant financial losses, they will be unable to afford to do this repeatedly.

Preparedness to treat hospitalized Covid-19 patients was and remains an important part of our societal response to this epidemic, and it is important to recognize that we need to financially support hospitals to preserve their ability to continue caring for the populations they serve.

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Annual of German and European Law

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How Congress should help hospitals in the next COVID-19 relief bill. The Hill Accessed