Nonprofit hospitals can manage Omicron's effects on operations and cash flows, finds Fitch

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While the Omicron variant of COVID-19 will likely cause challenges for the nation's hospitals, nonprofit hospitals in particular will be able to manage these challenges without outsized effects on operations and cash flows, finds a new report by Fitch Ratings.

There are still many unknowns about Omicron, and it could be weeks at the earliest before it's determined how effective vaccines are against the variant, and how severe the strain actually is. But the World Health Organization has designated Omicron as a variant of concern, and its transmissibility is likely to result in a greater number of cases, especially if it's better at evading immune responses. 

The general consensus is that vaccines will still provide some form of protection, but it's not yet certain if hospitalizations could increase among the unvaccinated.

Nevertheless, hospitals are preparing for another winter coronavirus surge of the Delta variant, with some hospitals in regions that are currently seeing a spike in cases already stretched thin, Fitch found. U.S. coronavirus hospitalizations are up 17% in the 14-day period ending December 8, with more than 58,000 people hospitalized daily, according to Health and Human Services data.

WHAT'S THE IMPACT?

COVID-19-related hospitalizations in the U.S. have been increasing since November 14, due in large part to a current surge of the Delta variant, and the Omicron variant may add to that trend, particularly among the unvaccinated, said Fitch. Early data shows Omicron is highly transmissible, meaning it could become a common strain of the coronavirus. But so far there has not been a corresponding surge of severe illness or hospitalizations.

Hospitals are remaining vigilant in the midst of an evolving situation, but they continue to be pressured by a shortage of healthcare workers, high turnover and, in many regions, high COVID-19 infection and hospitalization rates, the report found. 

Hospitals that are already overwhelmed with coronavirus cases have limited capacity to treat additional patients, and some have paused higher-reimbursement elective procedures as a result. The risk of severe illness among patients with other health issues also increases as care is delayed due to the pandemic.

The lost volume from elective procedures is delaying revenue growth, found Fitch. Operating margins will also be pressured in the near term, as the surge in new infections is postponing the restoration of normal volumes. Should Omicron not be as mild as generally expected, additional COVID-19 hospital admissions would result, exacerbating this negative effect on margins.

Lower-rated, typically smaller hospitals that have full intensive care units are less able than higher-rated hospitals to absorb a decline in reimbursement, lower elective volumes and an increase in expenses caused by the cost of maintaining sufficient healthcare staff, the report revealed. 

Healthcare job vacancies are the highest of any industry and average hourly hospital wages continue to rise. 

Highly-rated hospitals generally have enough financial cushion to manage a decline in revenue and an increase in operating costs, given that liquidity remains high. But this liquidity cushion could decline if there are continued pandemic-related shocks to the healthcare system, according to Fitch.

THE LARGER TREND

A little more than a week after Omicron was first detected in the U.S., 21 states have confirmed cases of the new COVID-19 variant.

This variant may be less severe, according to the World Health Organization and Dr. Anthony Fauci, chief medical advisor to President Joe Biden and Director of the National Institute of Allergy and Infectious Diseases. Data about the effectiveness of the vaccines on the variant could start to be ready by the middle of next week.

Booster shots are needed to neutralize the Omicron variant, according to a statement released by Pfizer. An initial laboratory study demonstrated that antibodies induced by the Pfizer-BioNTech COVID-19 vaccine neutralize the Omicron variant after three doses, the company said.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com