Financial Meltdown in “Swing Hospitals” during the COVID-19 Outbreak

Abstract

Hospitals in Japan have complete autonomy in deciding whether to admit COVID-19 patients, similar to that of the US. Taking this into account, we estimated the effect of admitting COVID-19 patients on hospital profits, using instrumental variable (IV) regression. Using IVs related to government intervention enabled us to not only estimate the effect of admitting COVID-19 patients among "swing hospitals," where both options (to admit or to not admit COVID-19 patients) could potentially be realized but to also evaluate the effect of government intervention on such hospitals. Our empirical results revealed that monthly profits per bed decreased by approximately JPY 600,000 (USD 6,000) among swing hospitals, which is 15 times the average monthly profits in 2019. This overwhelming financial damage indicates that it would be costly for swing hospitals to treat COVID-19 patients because of their low suitability for admitting such patients. Given the implications of our main results, we propose an alternative strategy to handling surges in patients with new infectious diseases.