The CFO and Ebola: Anticipating expenses

A hospital’s chief financial officer should be an integral part of the planning and preparation for Ebola patients, according to attorneys in the healthcare practice of national corporate law firm Barnes & Thornburg LLP.

“Hospitals operate on too tight of a margin now to set aside money waiting for something to happen,” said Laura Seng, partner and vice-chair of Barnes & Thornburg’s Healthcare Department. “They just have to be prepared. That’s why the CFO should be part of the team when a hospital is putting together its Ebola response plan.”

Most hospitals already have in place plans to cope with disasters such as tornadoes and plane crashes, said Seng, a former registered nurse. Ebola presents a challenge different than treating multiple victims of accidents or natural disasters, however, because it requires intense and expensive efforts to prevent the disease from infecting medical staff and the general population.

The vast majority of Ebola cases reported since the latest outbreak began nearly a year ago have been in West Africa. But a handful of cases in the U.S. since September 30 have alarmed the public, made Ebola a major political issue in the recent election, and presented hospitals and other medical facilities with serious challenges and decisions.

[See also: Ebola opens up health workforce rift.]

Doing nothing, Seng said, is not a viable option.

“It would be fiscally irresponsible at this point in time for a hospital CFO to think, ‘I can deal with this if it happens,’” she said. “They have to have a proactive plan in place now, so that when a patient walks into their emergency department, they can provide services for that patient as well as protect the staff and community from further exposure.”

Operational expenses
The first step a hospital must take in developing an Ebola response plan is to determine what level of treatment it should provide. The majority of hospitals will act as initial treatment centers, with a minority serving as specialized facilities for Ebola patients.

“We’re starting to see across the country where patients are going to be clustered into certain facilities that are ramped up and prepared,” Seng said.

In early November, for example, the Virginia Hospital and Healthcare Association announced that UVA Medical Center and VCU Medical Center would serve as designated Ebola treatment facilities in that state. And a half-dozen hospitals in Massachusetts agreed in late October to serve as Ebola specialty centers, electing to spread the burden of space, staff and cost requirements.

Even hospitals that aren’t specialty centers should expect to incur Ebola-related expenses. In announcing the Massachusetts plan, public health commissioner Cheryl Bartlett said “each of the state’s hospitals and their emergency departments are prepared to screen, identify, and isolate any suspect cases and coordinate with [the state Health Department] on risk assessment and patient transfers, as needed.”

That means extra costs for training and equipment, even if a hospital never sees an Ebola patient.

“A lot of hospitals are having practice drills around what happens if a patient comes into their hospital,” said Heather Delgado, another attorney in Barnes & Thornburg’s health practice who works with hospitals, health systems and other healthcare providers. “That’s an expense.”

[See also: Texas Health Presbyterian takes financial hit after Ebola crisis.]

Having the proper equipment for handling an Ebola patient, protecting staff and other patients at the hospital, and disinfecting facilities is another major cost.

“Money will have to be spent on personal protective equipment,” Delgado said. “The protective equipment recommended by the CDC are these airtight suits, and from what I understand they are extremely hot and can be worn only for two to four hours at a time. So some hospitals had to buy extra underwear, socks and boots in multiple sizes so people could strip out of these heavy-duty suits, and then everything they had underneath has to be thrown away and replaced.”

Equipment involved in transporting an Ebola patient also may have to be replaced.

“If an Ebola patient comes in by ambulance, a lot of times they’re getting rid of gurney mattresses, blankets, pillows, and anything else that’s contaminated by that patient,” Delgado said. “So material that normally could be re-used and sanitized is being thrown out and replaced. If you’re taking care of an Ebola patient around the clock, supply costs could be millions of dollars.”

The additional labor costs extend well beyond initial training.

The physician/nurse staffing ratio to take care of an Ebola patient is a lot higher.

“The patient doesn’t come in with a big sign that says, ‘I think I have Ebola,’" Seng said. “So you may have several staff members exposed to that patient before a diagnosis is made. Now you have staff replacement costs for those staff members who have been exposed, because those staffers are going to be taken offline. And so you’re going to have duplicate staffing costs.”

“The physician/nurse staffing ratio to take care of an Ebola patient is a lot higher, so that’s extra labor you’ll have to account for,” Delgado said. “Nursing overtime is another huge labor cost. CFOs should be looking now to build those labor and supply costs in their budget.”

Hospitals treating one or more Ebola patients also should expect to spend money on communications and specialized clean-up services.

“Hospitals are going to have to inform the public as well as their own staff about what’s going on, so they might need to hire an outside agency with experience in dealing with media communication,” Delgado said. “As for cleaning, we’re talking about specialized cleaning companies coming in that can disinfect everything. It’s very expensive.”