When coronavirus hit the east coast of the United States at the start of March, Interfaith Medical Center unexpectedly found itself on the front line. The hospital’s modest brick buildings serve a low-income community in Brooklyn. As New York became the national epicentre of the disease and the city went into lockdown, Covid-19 patients started flooding in.
“It’s been exhausting. Exhausting. Not just for me but for all my staff,” says LaRay Brown, chief executive of One Brooklyn, a recently formed medical group that includes Interfaith. “We are seeing very sick people come in through our emergency departments.” By mid-April, Interfaith and its two sister hospitals had cared for more than 1,600 patients hospitalised with the disease.
Just as worrying for Brown, however, is the dire financial position of the hospitals in her charge. “We are running on fumes,” she says, still managing a smile as she removes her face mask for a video interview. “We may have five or seven days of cash on hand — we celebrate if it is more than 14.”
As coronavirus has swept across the US, it has also ravaged the country’s healthcare system. Even with money from a $175bn bailout, many hospitals are facing critical cash shortages, because they have had to cancel the elective procedures that they rely on to make money.
Bankruptcy lawyers are preparing for a surge in filings. When US GDP figures for the first quarter were released, the decline in healthcare spending was one of the biggest drags on the US economy – accounting for about 40 per cent of the overall decline in consumption. Some of the poorest institutions have had to put much-needed staff on leave, even while the pandemic spreads, because they cannot afford to pay them.
The US spends far more on healthcare than any other country — $3.6tn a year, more than 17 per cent of its GDP. People come from all over the world to be treated in its top medical centres, some of which are global leaders in innovation. Many of these well-funded hospitals have been able to call on substantial resources to manage the current surge in demand. The US has had more coronavirus cases than any other country — and more than 55,000 deaths.
But the pandemic has also exposed the deep disparities in its healthcare set-up — for hospitals and patients alike. Scenes of hospitals in the world’s wealthiest country turning to beauty salons in their desperation to find protective gear, or trying to make their own bleach, have highlighted the chaos and pressures upon healthcare providers.
“When we look back, we will see this as a moment that laid bare some of the dysfunctions and inequalities in the American healthcare system,” says Adam Gaffney, an instructor of medicine at Harvard Medical School, and a pulmonary and critical care doctor. “We have a completely fragmented, privatised health system that continues to fail us.”
As the crisis roars, money is time. It should have taken a week for One Brooklyn to open a new intensive care unit of six beds in response to coronavirus. But a lack of funds meant the $700,000 expansion took three weeks. Brown has had to spend millions on extra equipment, hiring agency staff and increasing the pay of employees so that they don’t get hired away.
Cancelling elective procedures such as dental appointments and non-urgent surgery caused revenue to plummet. “So far we have spent about $7.2m, and that is money we don’t have,” she says.
A lack of coordination nationally — with individual states issuing varying medical guidance and competing against each other to secure protective gear — has also impeded the effort. In the US, public health authorities are separate from mostly private hospitals, further increasing the challenge of mounting a collective response.
Making sure One Brooklyn can provide adequate protection for its staff — about 500 have already become sick since the virus hit — has been stressful. Obtaining protective gowns has been particularly hard recently. “We are looking at using alternatives, like jumpsuits used by other industries,” Brown says.
Donations have helped — one family from Colorado mailed in 23 jumpsuits designed for nuclear reactors, with hand-painted messages of support on each. Those have been added to the stockpile, but are far from enough. “In three days, we could use 10,000 isolation gowns,” Brown says. “We really do need more of those.” She is so worried about the emotional toll on her staff that she’s setting up Zoom prayer meetings for them with a chaplain.
One Brooklyn’s efforts contrast starkly with what the best-funded US hospitals have been able to do to prepare for the pandemic. The University of Pennsylvania hospital, which sits on net assets worth $5bn, was able to spend $5m to rapidly open part of a new wing with 200 beds in April. By putting construction workers on three shifts a day, the gleaming building designed by star architect Norman Foster’s firm was opened 15 months ahead of schedule.
Penn is not alone. In 2018, 12 hospitals across the country announced expansion projects worth $1bn or more. The US has many wealthy hospitals — big brand names such as the Mayo and Cleveland Clinics. Their leaders are paid more like company executives than doctors: salaries for hospital executives soared 93 per cent in the 10 years to 2015, according to a study in a medical journal.
Interviews with hospital executives, doctors and industry groups suggest the gulf between rich and poor institutions could widen after coronavirus. Even if stimulus money bails out poorer institutions in the short term, they will face long-term economic consequences: credit will be harder to access; they will have to cover costs when unemployed patients are unable to meet their bills and the states are likely to cut insurance payment rates as tax revenues fall.
Donald Berwick, who oversaw Medicare and Medicaid during the Obama administration, says the financial stresses on hospitals right now are “unprecedented in their size and urgency” due to the removal of elective procedures. “This is a call to arms to have an American healthcare system that is universal and compassionate . . . If this doesn’t wake us up, I don’t know what will,” he says.
Have you or your family had direct experience of major disparities in the US healthcare system? Share your stories or thoughts below.
The US government funds more than half of healthcare spending — but it does not run the hospital system. Instead, it supplies public insurance in the form of Medicare, for seniors, and Medicaid, for the poorest, paying through a fragmented network of healthcare providers. To get by, hospitals must also have enough money coming in from commercial insurers or beg for extra subsidies.
Many are on the brink. More than a hundred have closed in the past decade, and a report last month from consultancy BCG estimated that 20 per cent were at “near-term risk of insolvency” before the pandemic. They now think the figure is between 30-40 per cent.
The high number of uninsured people in the US compounds the challenges of responding to coronavirus. At least 27 million Americans lack any health insurance, and that figure is set to rise as millions more lose their jobs. Without insurance, patients risk getting saddled with high bills from emergency room visits that they cannot pay, forcing bad debt on to the hospitals.
Even though the US spends trillions of dollars on healthcare, much of that is wasted. The funding gets used up by bureaucrats that have to code and bill every action a doctor takes, by doctors and hospital administrators paid far more than their European counterparts and by the soaring cost of drugs. A study last year in The Journal of the American Medical Association found at least $760bn was wasted in unnecessary health spending — more than the US spends on primary and secondary education.
Poorer hospitals that cater to low-income urban communities, or rural areas where population is declining, are dependent on government insurance. They say the payments from Medicaid do not cover their costs as the price of staff, equipment and drugs rises.
More than 80 per cent of One Brooklyn’s patients are on Medicare and Medicaid, and 4 per cent have no insurance at all. Unusually among US hospitals, the group has had regular financial support from the state because it provides essential care. In mid-April, it received $9.8m from the federal bailout. Like many hospitals, however, it was disappointed with how the money was divided.
There were no extra funds for financially distressed hospitals or those in Covid-19 hot spots. The money was based on how much revenue hospitals got from treating seniors with Medicare, not Medicaid. The next round will include some extra money for those hot spots — but the vast majority of funding still depends on how much the hospital had coming in last year, not how much they need.
Coronavirus could prove to be a moment of reckoning for how the US treats disadvantaged communities, says Berwick. “The safety-net hospitals are taking care of much more difficult populations with much more burden — chronic illness, substance abuse — tough populations with a lot of needs.”
Initial data suggests the disease has had a disproportionate impact on communities of colour. In New York, black and Latino people are twice as likely to die as white people. At One Brooklyn, the group has seen a high rate of hospitalisation among its coronavirus-positive patients. “Our community has been very significantly affected,” says Brown. “There is a reality that many of the hospitals that serve low-income communities of colour have the least amount of resources . . . Any public health crisis will uncover inequalities.”
Alan Levine has handled hurricanes, oil spills and natural disasters in his career as a public health official. But he has never seen anything quite like coronavirus, which recently arrived in rural areas of the US. As the chief executive of Ballad Health, a 21-hospital group that serves primarily rural areas across Tennessee, Virginia, and nearby states, his network has already seen nearly 200 cases.
“How am I doing? Do you really want to know?” he asks as we begin our interview, which takes place less than a week after he took a 100 per cent pay cut for 60 days, and placed nearly 10 per cent of his staff on furlough in an attempt to stop haemorrhaging cash. “The problem in rural areas and non-urban communities like ours is . . . whatever cash we lose now is going to be very difficult to recover. You can’t grow your way back.”
Many of the poorest, least resourced hospitals are in rural America, where decades of structural decline are coming to a head in the current crisis. “Most of our hospitals lose money,” explains Levine, a veteran healthcare official and previously the top health official in Florida under Jeb Bush. “They were losing money before the pandemic, and they are losing a lot of money now, and they are subsidised by our larger hospitals, because we have an integrated system of care.”
The failure of rural hospitals could threaten the US’s coronavirus response. So far, the worst outbreaks have been in urban areas. But rural numbers are ticking up and local hospitals are a first line of defence for communities that live hours away from other healthcare options.
“Hospital closures, particularly in rural areas . . . mean the US is less able to handle the Covid-19 crisis,” says Edwin Park, a professor at Georgetown specialising in healthcare. “The increases in the uninsured over the last two years, after years of progress, left us in a weaker position to address this crisis as well.”
When it comes to protective gear, Levine says dealing with hurricanes taught him that local authorities often have to take matters into their own hands. “The one lesson I learnt in all that is you don’t wait around for the federal government to help you. You need to be very aggressive locally.” Ballad was the first to offer drive-through testing for coronavirus in Tennessee, and after surveying its protective gear, recruited a local education group to help 3D-print face shields.
“The first stop shouldn’t be, ‘We need supplies from the federal government, please help us,’ ” he says. “The first response should be, you try to come up with solutions locally for your response.”
Through a combination of a new line of credit, and an advance on Medicare payments, Ballad has scraped together enough cash to operate through the autumn. Others may not be so lucky. “I think the pandemic is going to thrust a lot of rural hospitals into financial ruin, in the absence of government involvement,” says Levine.
Large or small, rural or urban, the majority of US hospitals are feeling the pain. The system has never before been tested by such a virulent and deadly illness. “This really is an unprecedented emergency,” says Ashley Thompson, senior vice-president of public policy at the American Hospital Association, who is urgently calling for more funding.
Most hospitals in the US are private, non-profit companies, which must make money to stay open. Of the $175bn pledged by the government to help them cope with coronavirus, only $50bn has been dispersed so far — less than 2 per cent of annual US health spending.
Providence, a 51-hospital network on the West Coast, saw some of the first coronavirus cases in the country. Even though it is one of the biggest US hospital systems, the disease led to a “huge liquidity crisis”, says chief financial officer Venkat Bhamidipati. The group secured a $1bn credit line but that is only enough to last for two months. “We are scrambling to make sure we have enough oxygen to continue taking care of patients,” he says.
At Three Rivers, a rural hospital in Washington state, chief executive Scott Graham is preparing for the possibility that he might have to shut the hospital altogether. “Right now we are negative cash, we are probably three to four days negative cash on hand,” he told the FT on March 26. “I’ve worked in some financially stressed organisations, but I have never seen anything like this before.”
Even President Donald Trump acknowledged hospitals have been “decimated” by the coronavirus pandemic. “You know, they’ve given up their business — which is good, because they did the right thing — in order to take care of Covid-19,” he said at a White House briefing in mid-April.
At Margaret Mary Health in rural Indiana, chief executive Tim Putnam has been trying to cope with staff illness and the bills for expensive protective gear. The 25-bed hospital has had to expand its ICU unit and at one point half of its obstetricians were off sick. “People talk about the United States healthcare system like there is one. There really isn’t,” he says. “There are some partnerships and there’s some collaborations but, by and large, it is a competitive environment.”
Hospitals in rural areas, like his, often struggle the most. “One rural hospital in this country closes every three weeks, and I think this pandemic is really going to put a lot of them in jeopardy,” says Putnam. He adds that rural health is often overlooked because the majority of Americans live in cities. “In a democracy, sometimes it’s very difficult to get what you need when you only represent 20 per cent of the population.”
The twin demands on US hospitals — to provide care for a community, and to make enough money to stay open — have been in conflict during the pandemic. Rosemary Stevens, author of In Sickness and in Wealth: American Hospitals in the Twentieth Century, says competition has always been valued in the US hospital system. “From the late-19th century, hospitals got more and more business-like. In one sense, it is ridiculous to call a hospital a business. Is that why it exists? Because it is earning money?” she says.
While the UK was creating the National Health Service after the second world war, bringing hospitals into a single public system, the US was focused on health insurance. At first, employers lured staff with commercial insurance to pay hospital bills, then, in the mid-1960s, the government began to fund its own insurance plans. Even Medicare for All, the plan touted by Bernie Sanders and other progressive Democrats, does not advocate publicly run hospitals, but rather focuses on an insurance plan for everyone.
Sam Maizel, a bankruptcy lawyer at Dentons in Los Angeles, says this lack of centralised planning results in an “arms race” where hospitals compete to construct the best buildings and buy the most sophisticated equipment to attract patients and doctors. He contrasts this to the NHS. “[An] organised national healthcare system could say ‘This hospital doesn’t make money, but we need a hospital in that neighbourhood in Manchester’,” he says. “That’s not how healthcare works in America.”
One silver lining of the pandemic is that collaboration between rival hospitals has become much more common. At Margaret Mary Health, the small rural hospital was able to borrow doctors from another institution when their own fell ill. “There are no competing hospitals during a pandemic,” says Putnam. “A lot of the hospitals have come together to build stronger relationships than we’ve ever had before.”
In Philadelphia, the coronavirus cases have trickled, rather than flooded, in. Nevertheless, the Hospital of the University of Pennsylvania — which is the oldest medical school in the US — was well-prepared.
Its $1.5bn new building on the banks of the Delaware River wasn’t supposed to open until next year. But when coronavirus hit, the hospital was able to accelerate construction to get beds ready months ahead of schedule. As one of the most prestigious and well-funded medical groups in the nation, Penn Medicine says it is doing everything it can. And it has the funds to do so: the non-profit group made $762m in 2018, and $1.1bn in 2017 (in terms of excess revenue over expenses).
“We are in a fortunate position in that we were strong financially before coronavirus hit,” says chief executive Kevin Mahoney, who has been working at Penn since the late 1990s. “I have a decline in revenue [now], I have a sharp uptick in expense, as we have been buying PPE and medical tents.” But the group has still been able to invest in preparations for the crisis, such as developing an app for Covid patients staying home. Penn Medicine is also participating in trials for a potential coronavirus vaccine.
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“A crisis allows innovation to accelerate,” says Mahoney. He points to a surge in telemedicine consultations, which rose from 150 during the first two weeks of March, to 40,000 during the second two weeks of March, as the hospital shifted more visits online as a result of the pandemic.
Penn also acts as overflow for clinics and smaller hospitals nearby, which refer their most critical patients to its ICU for care. Mahoney is concerned that other hospitals in the area are struggling financially. “Perhaps as many as a dozen hospitals will close in the general area that we’re in. Because this crisis will be the thing that puts them over the top.”
One of the Penn doctors, Maurizio Cereda, points out that the scale of large US hospitals — in terms of number of beds and resources — is almost unknown in Europe. Penn Medicine has already treated more than 1,200 coronavirus patients across its network of six hospitals, and has a further 2,000 patients with coronavirus monitoring themselves at home, using their Covid app.
“Institutions like mine, they have broad shoulders, so they can absorb this, at least for a while,” he says. As a critical care doctor and anaesthesiologist who studied in Milan, he stayed in touch with doctors in Italy as coronavirus tore through Lombardy. Using what he heard from them, he wrote an early memo on how US hospitals could learn from the Italian experience.
The situation at Penn is quite “manageable”, he said in mid-April. “Because we are a big hospital, we are managing pretty well . . . We are working safely, we have protection, the routines have not changed dramatically.” While caring for coronavirus patients is “busy” and “stressful”, hospital staff have everything they need. “I just came off from a week in the ICU,” he says. “And I can tell you, compared to what my Italian friends experienced, I am embarrassed.”
While Philadelphia remains under lockdown, the situation at Penn Hospital is under control. It has easily been able to accommodate all critical coronavirus patients. The new wing that was prepared has not yet been needed.
As US states begin to ease lockdown restrictions, some hospitals are starting to make plans to restart elective procedures. In late April, Texas gave the green light for certain operations to resume, and for-profit hospitals groups like Tenet say they are preparing to restart there.
But most hospitals say that until they have more access to testing and protective equipment, some restrictions could stay in place for a long time, leading to continued financial pain. “Once we do emerge from this, we are all going to emerge from this probably with more debt, or with a cashflow crunch,” says Levine of Ballad. “Frankly, it’s pretty concerning.”
The US has been grappling with how to change its unwieldy healthcare system for decades. Could the pandemic ignite a movement to finally make it more equitable? It’s possible that, just as the hardships of the second world war played midwife to the NHS, Covid-19 could change US hospitals for ever. But it’s also possible the system could sink further into dysfunction.
Ilhan Omar, a progressive Democrat from Minnesota who is part of the so-called “squad” of four radical first-term congresswomen, said in a statement to the FT that the crisis has demonstrated the “clear failings” of the system. “The fact that our front-line workers lack PPE is reprehensible. There have been numerous stories of people forgoing treatment because they didn’t have health insurance. Moving forward, I hope this crisis highlights why every person should have access to health insurance and underscores why we need Medicare for All.”
For now, few policymakers seem to be looking that far into the future. Neither Trump nor Joe Biden, his opponent in the US presidential elections, are promising dramatic change for hospitals, which risk being thrown from a crisis on the wards to a crisis in the bankruptcy court. As the economy dives, buyers for hospitals will be harder to find — and so some of those doing their best to care for stricken patients may end up closing their doors.
At One Brooklyn, Brown is negotiating expenses a week at a time. Without subsidies from the state, the hospital would not be able to pay its staff. As an alumna of UPenn, she knows the inequality in the US healthcare system only too well. She chuckles about receiving their press releases “about how great they are” — and asking graduates for money. “They’re a very rich hospital, a very rich, rich university and they have a lot of resources. Places like mine, we don’t have wings that we were in the middle of developing,” she says.
She hopes the pandemic will push the US into giving more financial support to its small urban and rural hospitals: “I think that lesson is, what can the richest country in the world do to ensure that we are better prepared for the next crisis?”
For now, One Brooklyn is taking it patient by patient. Each time someone who has been through coronavirus is discharged, a song comes over the loudspeaker. It might be “What a Wonderful World” by Louis Armstrong, or “I Will Survive” by Gloria Gaynor, one of dozens chosen by staff. For those who work there, it is usually the highlight of the day, says Brown. “When the chime rings and they hear ‘I Will Survive’, it is a small thing but it gives people big relief.”
Have you or your family had direct experience of major disparities in the US healthcare system? Share your stories or thoughts below.
Leslie Hook is the FT’s environment and clean energy correspondent. Hannah Kuchler is the FT’s US healthcare correspondent
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