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New Analysis: Dramatic GDP Reduction Reflects Unprecedented Financial Stress on Hospitals

WASHINGTON – The Federation of American Hospitals, in conjunction with FTI Consulting, today released a new analysis showing how a decline in health care spending as a result of COVD-19 – fueled by an unprecedented drop in scheduled hospital services and revenues – is the main driver behind the recent decrease in the Gross Domestic Product (GDP).

“The future of hospital care in America is teetering, and some facilities may not recover from the COVID-19 pandemic economic crisis. The facts on the ground are totally unprecedented. The health care sector is contributing half the decline of the larger recession. When you do a deep dive into the roots of the massive drop in GDP – you see a desperate trend for hospitals. The failing financial health of hospitals could have a lasting negative effect on patient care and on America’s economic future,” said Chip Kahn, President and CEO of the Federation of American Hospitals.

The FTI analysis says that, according to the U.S. Bureau of Economic Analysis (BEA), the recent drop in health care spending is a driving force behind the estimated 4.8% decrease in GDP in the first quarter of 2020.

In March alone, the component of GDP relating to hospitals dropped 12.1% coinciding with the declaration of a global COVID-19 pandemic on March 13th. This decline represents the most significant reduction in recorded history – dwarfing the second-largest decline (3.1%) in March of 1970. April numbers are likely to be worse.

The report concludes that a primary reason for this drop is the slowdown that hospitals experienced in March due to bans on scheduled procedures, treatments and diagnostics imposed across the country.

You can find the complete report here.