Hospital Cost Structure and the Implications on Cost Management During COVID-19

Excerpt

The ongoing COVID-19 pandemic has been disrupting hospital operations in the USA.¹ Thirty states and the District of Columbia issued executive orders requiring that elective procedures be canceled or postponed in order to prioritize hospital capacity, preserve personal protective equipment for COVID-19 care, and ensure the safety of patients and medical staff.² Concerned about potential exposure to infection, patients also have been limiting hospital visits. Facing a sharp decline in revenue, many hospitals have initiated layoffs, furloughs, and salary cuts to contain costs and maintain financial viability.³ A detailed analysis of hospital cost structure remains an unexplored area in the literature. This study aims to examine the structure of hospital operating costs and how it varies across cost functions and types in order to understand hospitals’ cost management responses during the pandemic. …