Major decline in health spending in Q1 led to decline in GDP, analysis finds

coronavirus mask, market, down arrow
A massive decline in healthcare spending in the second quarter of 2020 led to a 4.8% decline in GDP, a recent analysis found. (Pixabay)

A new analysis estimates a recent drop in healthcare spending spurred by the COVID-19 pandemic is the main driver behind an estimated 4.8% decline in the gross domestic product in the first quarter of the year.

The Federation of American Hospitals released the analysis led by FTI Consulting on Friday. The group said that the analysis underscores the need for more funding to help prop up hospitals wracked financially by the loss of elective procedures and low patient volume.

“The failing financial health of hospitals could have a lasting negative effect on patient care and on America’s economic future,” said FAH President Chip Kahn in a statement.

FTI found that the component of GDP relating to hospitals dropped 12.1% in March, a record-breaking figure.

“The 12.1% hit to hospitals in Q1 dwarfs the second-largest decline (3.1%) recorded in March 1970,” the analysis said. “During the Great Recession (2007-2013), the monthly decline in hospital revenues never exceeded one percent.”

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Major health systems such as Tenet, Bon Secours Mercy Health and Detroit Medical Center have furloughed workers due to the cash crisis.

Some states have allowed health systems to restart elective procedures vital to their bottom line, but hospital systems are making sure that they have enough testing, protective equipment and staff to do the procedures safely. Another concern is making patients feel safe enough to even consider coming to the hospital and how to segregate patients from COVID-19 cases.

Congress has given $175 billion in funding to hospitals that is starting to be distributed by the Department of Health and Human Services (HHS).

HHS started to distribute $12 billion on Friday to hospitals in COVID-19 hotspots and $10 billion to rural hospitals and providers.

But provider groups are hoping Congress will give more funding. The American Hospital Association and American Nurses Association wrote to congressional leaders last Friday calling for a separate fund to help frontline healthcare workers with a variety of issues such as loan forgiveness for accelerated payments and ensure commensurate pay for all healthcare providers.