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Unforeseen Financial Impacts

Mike Langlois | Tuesday, January 19, 2021

Happy New Year! The year 2021 must be better than 2020, right?  We are not off to a great start. Amid the political strife, racial tensions, and a surge of COVID-19 cases throughout much of the United States, IDNs are continuing to experience financial pressures. Some of these impacts have been very predictable while other impacts have been hidden. Although my thoughts on unforeseen financial impacts may not apply to all organizations, I trust you’ll find the information beneficial to many organizations.

Some of the more obvious and tangible financial impacts of the COVID-19 pandemic include the dramatic increase in the use of Personal Protective Equipment (PPE) and the high price we paid to purchase, store, and transport these products. With supplies being limited and demand skyrocketing, healthcare leaders needed to manage several variables.

  1. Suppliers raised prices of PPE items four to ten times the normal cost
  2. Warehouses needed to be quickly leased and set-up to receive, store and distribute these products to the end-users
  3. Transportation expenses experienced to get these products to our warehouses were unexpected, to say the least.

These variables, along with labor and other operating expenses to manage these warehouse operations, increased the overbudget status.

What about the more intangible costs? Staffing shortages impacting daily operations have continued to be prevalent, whether the staff is out due to contracting COVID-19, being exposed, or needing to get tested. Additionally, many organizations continued to pay their employees full wages and benefits when they could not work for these reasons, without asking them to tap into their paid time off banks. 

Backfilling these staff members with temporary help has proven difficult at best, with many individuals being unwilling to enter an unfamiliar work environment for fear of being exposed to the virus. Over time, when accepted, has been an added cost for many organizations to continue to meet the demands of daily operations. 

Aside from staffing shortages, work productivity also took a negative turn for many organizations.  Additional breaks have been offered to give on-site staff a breather from having to wear a mask all day. Physically changing work environments to allow for social distancing also has led to less efficient processes.

Moreover, allowing those staff members that can work from home the opportunity to do so, has lessened the efficiencies of working in a team environment and, I suspect in many cases, less work being performed. Organizations have also experienced the financial impact from the additional costs to add or improve the technical capabilities needed to work from home. 

All of the above unforeseen costs will continue to put a strain on most, if not all healthcare organizations in 2021. Along with the added labor and supply costs to administer the vaccine and the additional marketing costs to calm individuals fearing to go to the hospital for any reasons, it’s clear healthcare leaders must plan and prepare to ensure we can efficiently manage these unforeseen costs in 2021.