THE IMPACT OF COVID-19 ON THE ROMANIAN HOSPITALS' EXPENSES. A CASE STUDY TOWARD THE FINANCIAL RESILIENCE AFTER THE PANDEMIC.

• Author: Gyorgy, Attila

1. Introduction

   The Coronavirus disease 2019 (COVID-19) affected unexpectedly the current activities worldwide. In a short time, governments had to react in order to offer treatment to those affected by this virus and mitigate its effects in almost all fields of activity. Thus, governments introduced gradual measures as they managed to identify levers presumed to be effective; these measures ranged from the simplest to the most drastic lockdowns for quite significant periods of time.

   Under the aforementioned unpredictable and uncertain environment, different activities from various domains had to change and adapt in order to survive, to further offer the goods and services for which they were established, and to be in line with the needs of clients and beneficiaries.

   The medical sector was one of those which were most significantly impacted because the source of the problem was the pandemic of coronavirus disease. The medical infrastructure was not sized for a high scale shock, specialized human resources and medical infrastructure proving to be much undersized and with slow growth potential in comparison with the evolution of specialized medical needs. Hospitals were the frontrunners in this field, taking into account the needs for long-lasting treatment and recovery, in many cases with connectivity to oxygen facilities for invasive or non-invasive ventilation. Thus, activities specific to infectious diseases have exploded, being offered in spaces that were not long ago used to treat other types of diseases. In order to realize such shifts, important financial resources were reoriented in this regard.

   In our research we want to offer a slightly different perspective and fill a gap in the literature because 'a detailed analysis of hospital cost structure remains an unexplored area in the literature' (Bai and Zare, 2020, p. 2807). Thus, we analyze the impact of COVID-19 over the main categories of expenses of all Romanian hospitals which were designated to officially hospitalize patients with symptomatic COVID-19 and provide treatment for moderate, severe and critical forms of the disease in order to explain the variance of hospital expenses, helping to understand how medical sector resilience can be faster and better fulfilled and offer a tool for predictability of expenses. In this regard, in the second section we presented the relevant literature which focuses on hospital costing, especially during pandemics. In the third and fourth sections we presented two case studies which highlight the impact of COVID-19 on different variables that explain the variance of hospital expenses using the OLS method with fix effects. In the fourth section we selected for each hospital, on a monthly basis, the expenses related to compensation of employees, use of goods and services, depreciation of fixed capital, drugs, sanitary materials, reagents, disinfectants, and laboratory materials, in order to compare with the monthly number of sick cases due to COVID-19, respectively with the number of deceased due to COVID-19.

2. Literature review

   International Health Regulations adopted by the World Health Organization (WHO) define officially what public health emergencies of international concerns are (WHO, 2016, p. 9). Since its revision in 2007, nine health events were counted: the influenza A (H1N1) pandemic, the Middle East respiratory syndrome coronavirus (MERS-CoV) outbreak, the international spread of poliovirus, the West Africa Ebola virus disease outbreak, the Zika virus outbreak, yellow fever, the 9th and 10th Ebola virus disease outbreak, and the on-going epidemic of COVID-19 (Mullen et al., 2020, p. 2).

   COVID-19 generated a change in the activity of hospitals, the number of patients they treated, the ailments which needed medical support. All these caused changes in the level and structure of the expenses; all the main categories (staff remuneration, consumables, and fixes assets) were affected, but each category reacted differently.

   In periods of severe pandemics, authorities can decide that selected hospitals will cease all day-to-day activities and shift completely to fight against the challenge represented by the new virus. As in the case of the influenza pandemic, this is happening because 'hospitals will need to allocate limited healthcare resources in a rational, ethical, and organized way so as to do the greatest good for the greatest number of people. This can be done by deferring nonemergency care and, if necessary, instituting alternative patient care routines' (Toner and Waldhorn, 2006, p. 400).

   Staff remuneration expenses increased in some cases because in many countries new health workers were hired (Hernandez-Quevedo et al., 2020, p. 42), and in other cases bonuses were approved for existing workers.

   From the perspective of medical supplies, COVID-19 required larger quantities of oxygen for ventilation, specific drugs recommended for treatments, but also different sanitary materials, reagents, disinfectants, and laboratory materials. For example, Al-Gheethi et al. (2020, p. 10) pointed out that 'the survival of the virus on surfaces requires effective disinfection to ensure that the virus has become inactive', a process which generates costs.

   During COVID-19, respiratory therapy was an important component of healing many hospitalized patients. A similar situation was also due to 2009 H1N1 influenza, when Wiesen et al. (2012, p. 7) compared the consumption of resources, as measured by hospital charges, in the case of patients with acute lung injury (ALI) or acute respiratory distress syndrome (ARDS) confirmed or suspected H1N1 infection vs. ALI/ ARDS arising from other etiologies (non-influenza group); the authors concluded that 'respiratory charges are more likely a reflection of duration of mechanical ventilation rather than the degree of ventilator support necessary'. But, absolute intensive care unit (ICU) 'charges for room and board, blood products, pharmacy, radiology, average daily charge, and overall charge per patient were larger in the noninfluenza group. ICU charges for blood products in the noninfluenza group were greater by a factor of four, and pharmacy charges double that of the H1N1 group. This finding is likely a reflection of the higher prevalence of underlying comorbid medical conditions in the noninfluenza group, such as malignancy and cirrhosis, which require expensive medications and predispose to anemia. Moreover, the high mortality in this cohort likely precluded even higher hospital charges. Nevertheless, the H1N1 cohort amassed charges of similar magnitude to the most ill and expensive patients in the ICU, indicating the abundant health care resources consumed by severe pandemic influenza infection' (Wiesen et al., 2012, p. 7).

   Fixed assets are the main component of the infrastructure used by medical units to offer services. Catana (2020, p. 172) highlighted the fact that the historical investments in the healthcare system in EU countries did not lead to a limitation of the number of deaths.

   In regard to the efficiency of measurement of medical outputs in a pandemic, it could be based on the number of sick cases and the number of deceased due to COVID-19. This approach was also used by Dan et al. (2009, p. 1911) when they quantified how the virulence or case-fatality rate of a respiratory viral infection had a serious impact on the hospital infection control response using the actual number of deaths and ill persons.

3. COVID-19 impact on expense aggregates

   In this section, our goal is to reveal the impact of the...