Analyzing the Financial Impact of COVID-19

By Iodine Data Science Team – May 13, 2020 

This is Part III of Iodine’s series on the clinical and financial impact of COVID-19 and what healthcare finance leaders need to be aware of as they plan for short- and long-term resiliency. Part I focused on the mortality impacts of COVID-19 and Part II on COVID-19 length of stay and ventilator demand.

Iodine Software is a healthcare AI company that has pioneered a new machine learning approach—Cognitive Emulation—to help healthcare finance leaders build resilient organizations. To date, Iodine has partnered with over 600 hospitals in the United States to create a large and diverse clinical data set that can provide insights into the COVID-19 pandemic. 

Iodine’s Cognitive Emulation approach analyzes the full clinical record for each patient much the way a clinician would, but on a massive scale. Coupled with proprietary technology that forecasts DRGs for every patient still in the hospital, Iodine is able to look in real time at trends emerging in its data set without having to rely on final coded data that is typically only available post-discharge, after a considerable delay. 

Using Iodine’s CognitiveML engine and the Iodine Forecast product, we identified likely COVID-19 patients and predicted the DRG for recently discharged, but not final-coded, cases. More than 60,000 COVID-19 cases from the 600+ hospitals in Iodine’s current data set—spanning cases from the entire country including both infection hot spots and emerging areas of concern–were reviewed. The timeframe for this analysis is from March 4 through May 3, 2020. Both structured and unstructured data were leveraged to generate this analysis.

COVID-19 Patient Impact on Revenue
This analysis shows the impact on year-over-year weekly reimbursement an average hospital would expect as it cares for an increasing volume of COVID-19 patients. 

Even prior to handling an appreciable volume of COVID-19 patients, hospitals were already experiencing an approximate 30% dip year-over-year in expected reimbursement. In anticipation of increased admissions due to COVID-19 and the potential risk of transmission to other patients, facilities across the country cancelled elective surgeries and postponed non-urgent procedures. These actions drove a significant drop in expected overall reimbursement. 

Although we see overall reimbursement rising as hospitals treat higher volumes of COVID patients, surgical reimbursement continues to be suppressed. This could be worrisome as hospitals exit the pandemic, as medical dollars are expected to go down as COVID admissions decrease. Unless surgical volumes appreciably recover, we expect overall reimbursement to sink once more.

The figure below shows the following: 

  • Overall reimbursement starts off steeply lower than 2019 levels with a 30% YoY decline.
  • This depressed level of reimbursement remains fairly consistent until COVID-19 patients account for 7% of weekly admissions.
  • Reimbursement begins to recover as the volume of COVID-19 patients surpass 7% new weekly admissions. We have found that two scenarios contribute to this recovery:
    • For a certain number of facilities, the volume of medical admissions during COVID-19 is similar to their historical volume, but case mix index (CMI) increased dramatically due to a higher percentage of COVID-19 cases. The medical CMI increase of 30%-70% on a per-facility basis has lessened the depression in year-over-year reimbursement.
    • A smaller number of facilities also experienced an increase in medical case volume due to more COVID-19 admissions. In this situation, the total medical admissions increase coupled by a rise in medical CMI drives significant medical reimbursement improvement.
  • Reimbursement reaches about 100% of the previous year’s reimbursement level when the volume of COVID-19 patients reaches 10% of weekly admissions. However, this is only possible due to the influx of medical admissions. During this period, surgery reimbursement significantly drops to only 45% of the previous year’s surgery reimbursement level.

Note: This analysis only shows the expected reimbursement impact as COVID-19 admissions rise, and does not directly imply what a post-pandemic recovery may look like. Also this analysis does not account for additional expected reimbursement provided by the CARES Act, which increases Medicare reimbursement for COVID-19 cases.

Breakdown by MDC
The figure below shows the observed year-over-year change in admission volume percentage, broken down by Major Diagnostic Category (MDC), for COVID facilities, for March and April, 2019 and 2020. 

Note: This study defines a COVID facility as a facility where COVID-19 admissions represent at least 5% of the total admission for that month. Reference to a non-COVID facility is defined as a facility where COVID-19 admissions represent less than 5% of the total admissions for the month.

At COVID facilities, while most other MDCs experienced a decline in volume as expected, Respiratory and Infectious Disease admissions volumes were up, about 90% and 70% respectively. Trauma Surgery volume was up about 20%.

The next figure shows the same analysis for facilities where COVID-19 admission volume represents less than 5% of the hospital’s total admissions in a month. In anticipation of a COVID-19 case surge, and per CMS recommendations, facilities not immediately impacted by COVID cases had an overall reduction in admission volume across almost all MDCs. Trauma (Surgical) was the only MDC with any volume increase, and it only increased by 3.9%.

A comparison of the two figures also shows that at COVID facilities, the average MDC surgical volume decreased by 41%, while at non-COVID facilities, the average MDC surgical volume only decreased by 23%.

Conclusion
What Iodine has found to date ranges from verification of trends seen on far smaller data sets to seemingly new insights; and we’ve only just begun. Subsequent analyses will provide week-by-week updates, as well as extensions of this analysis into financial recovery questions.

Prior to COVID-19, health systems were already operating on generally thin margins, with many finance leaders acknowledging that a significant root cause was leakage from their mid-revenue cycle and that “average performance” was still well below optimal results. 

With health systems now facing an unexpected reimbursement decline of up to 30% YoY, CFOs and Revenue Cycle departments need to come up with both short- and long-term strategies to ensure resiliency. Iodine welcomes collaboration to accelerate the mutual understanding of this disease and to help hospitals cope with the challenges it presents them. Please contact us at info@iodinesoftware.com