Bear Market – June 15

An “Epic Financial Threat” To Hospitals

By Editor, Bear Market

When this coronavirus pandemic began in the US in March every talking head, politician, doctor, scientist, official, and anyone else who had a voice said we needed to lock the economy down and keep as many people home as possible to avoid overwhelming hospitals.

We needed to stay home to keep as many people as possible from getting the virus because hospitals didn’t have enough doctors… There weren’t enough nurses. There weren’t enough ICU beds in the country. And there weren’t enough ventilators to go around if a huge amount of people got the coronavirus in a short period of time.

This makes sense… No one wants to die if unavoidable… But no one especially wants to die of a disease in horrible pain because there aren’t enough medical resources to go around.

As Americans we generally complied. Stopped going out as much. Stayed in our houses. And put off things until a later time unless they were absolutely necessary.

This worked well to slow the spread of coronavirus from mid March to Early June.

Instead of the expected rush of people going to hospitals for the coronavirus people put of all unnecessary hospital visits.

This means fewer are getting blood work and routine medical care.

Fewer people are doing “elective” surgeries.

And fewer people are going to the emergency rooms and urgent cares.

There are enough rooms for those that need them now.

We did our part as Americans… But this is where the law of unintended consequences come in…

Hospitals are now are facing economic devastation. Because we did “what we we’re supposed to.”

According to a report from the American Hospital Association US hospitals are projected to lose a combined $200 billion in revenue by June 30th.

Hospitals nationwide losing $200 billion is equivalent to the entire Walt Disney Company (DIS) in terms of market cap. Its current market cap is $203 billion as of this writing.

And that since March – when this pandemic started here in the US – hospitals are losing a combined $50 billion per month in revenue.

If this trend continues hospitals will lose a combined $500 billion in revenue this year. That’s bigger than Warren Buffett Berkshire Hathaway as its current market cap is $440 billion.

In “normal” times hospitals operate on thin margins due to laws, regulations, and taxes.

In worse times – this is catastrophic for hospitals.

How bad?

Hospitals nationwide are already closing because of this. With rural areas being particularly hard hit.

An estimate from The Chartis Center For Rural Health found that 453 out of 2,000 rural hospitals were in danger of closing.

This is 22.7% of all rural hospitals nationwide.

And its not just smaller hospitals either.

The world famous Mayo Clinic which runs 23 hospitals nationwide said it expects to lose $3 billion in revenue in 2020. And this is after “extensive” salary and staff cuts.

One of the hardest hit areas in the US has been in New York State… And teaching hospitals in the state are losing between $350 and $450 million per month.

And according to Harvard Professor Eugene Litvak who’s worked and consulted with hospitals for more than 20 years now – “almost all hospitals are bleeding red ink.”

The initial rush to save lives by cancelling elective tests, procedures, and surgeries was maybe the right thing to do in March and April. But that’s now turning out to become a gigantic maybe.

But because of that, we’re now all in danger if the entire hospital system collapses due to these things.

This is a case of unintended consequences going haywire. And city, state, and federal officials not thinking things through properly.

And also a case of the medicine – in this case the short term cuts to hospital services – causing even worse long term problems.

Because whether hospitals collapse due to becoming overwhelmed by patients… Or because of a lack of patients… Either way, we’re all in a lot of trouble. And its now looking like our hospital systems will face major issues no matter which option we chose.


Team Bear Market


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