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Jump to All Downloads & LinksIn mid-March 2020, the world changed for Californians and their health care system. As COVID-19 infections began spreading across California, Governor Gavin Newsom announced a statewide shelter-in-place order and requested that the state’s hospitals increase their inpatient bed supply from approximately 80,000 to 130,000 — a 62% increase. Health care leaders and the state moved quickly to enhance capacity.
Before the pandemic, California’s hospitals collectively averaged nearly 257,000 inpatient and four million outpatient visits each month. As COVID-19 containment efforts took hold, patient volume fell precipitously as hospitals discontinued elective and nonurgent care at the urging of the US Surgeon General, professional organizations, and state officials.
With a decline in operating revenue and added COVID-19-related expenses, profitability at acute care hospitals in California has likely decreased substantially. This report provides initial estimates of some of the immediate financial and longer-term impacts of the COVID-19 pandemic on California’s hospitals and health care system. Data sources include California’s Office of Statewide Health Planning and Development and Collective Medical, a care coordination software company and investee of CHCF’s Innovation Fund.
In the medium and longer term, the authors project that hospitals in the state will experience significant downward pressure on revenue as more Californians shift from employer-based to public health insurance coverage. Meanwhile, absent additional public sources of funding, preparation for future pandemic and public health emergencies could add to underlying cost structures. These forces, along with ongoing pressure to reduce health system spending, will require hospitals to find new operational efficiencies to survive in a post-COVID-19 environment.
Authors & Contributors
Glenn Melnick
Glenn Melnick, PhD, is an expert in health economics and finance. He joined the USC Price School of Public Policy faculty in 1996 and currently holds the Blue Cross of California Chair in Health Care Finance. Previously, he served as a faculty member of the UCLA School of Public Health, a consultant at RAND, and an expert witness for the Federal Trade Commission. He has been published in American Journal of Public Health; Health Affairs; Medical Care; Journal of Health Politics, Policy and Law; Health Policy Reform: Competition and Controls; and the Journal of Ambulatory Care Management. He has also been principal investigator for a number of funded projects in Jakarta, Indonesia, and in Taiwan.
Susan Maerki
Susan Maerki, MHSA, MAE, is an independent consultant. Previously, Maerki was a director and health policy specialist at PricewaterhouseCoopers (PwC) where her clients included state Medicaid agencies, health care foundations, health care professional organizations, commercial insurers, and state policy agencies, such as state departments of insurance and Covered California, the individual health benefit exchange.
