COVID-19 Economic Impacts

Part
01
of two
Part
01

COVID-19 - Industry Implications: Finance

The spread of Coronavirus (COVID-19) in the United States will continue causing liquidity and economic slowdown. Banks and financial institutions will be forced to adjust their daily operations to help fight the spread of the virus.

Liquidity and Economic Effect

  • A report by Deloitte noted that the United States 10-year bond yield has fallen below 0.5%. The fall of the yield shows increased liquidity stress for both individuals and organizations. As a result, it is speculated that access to credit facilities will be limited thus increasing the chance of default on corporate and private debts in the coming days.
  • The Treasury's benchmark yield is expected to decline and has reached 0.318%, the lowest rate in the past 10 years, early last week. Experts warn that the situation will get even worse as the pandemic continues raging, denying the country much-needed investment for the future.
  • Due to the continued spread of COVID-19, the United States Federal Reserve has intervened and lowered its benchmark by 50 basis points to a range of 1% to 1.25%. The measure is aimed to enhance liquidity in the market for the coming days.
  • Also, an article by Forbes says that now that the virus is widespread, the central bank has adjusted its federal fund rate target range to 0%-0.25%. This move is projected to, “disproportionately impact low-income earners with minorities likely to bear the brunt of the economic impact of coronavirus.”
  • Also, banks are requested to extend credit to hard-hit borrowers and renegotiate and restructure credit terms due to the temporary hardship caused by COVID-19.
  • With the current situation, COVID-19 will continue causing financial problems, especially for companies with heavy debts due to delayed shipment and production schedules.

The Operation of Financial Institutions

  • The United States Security Exchange Commission (SEC) has granted temporary and conditional relief to fund advisers. It has exempted them from “certain filing and delivery requirements under the Investment Advisers Act and from in-person meeting and certain filing requirements under the Investment Company Act of 1940.”
  • As COVID-19 continues to spread, financial institutions in the United States, like other financial institutions in countries affected by the virus, are advised to allow their staff to work remotely except for functions that must be performed in the workplace. Managers are advised to craft ways to supervise staff working remotely and keep them informed on the company's response toward COVID-19.
  • In a statement the Federal Deposit Insurance Corporation (FDIC) requests that financial institutions work with affected customers and communities going forward to help mitigate the adverse effect of COVID-19. One of the proposed efforts is to waive fees such as ATM charges for customers and non-customers, overdraft fees, early withdrawal fees, and late penalty fees on credit.
  • Other efforts proposed by FDIC include "increasing daily ATM withdrawal limits", "increasing credit card limits", "easing restrictions on cashing out-of-state and non-customer checks", and "offering payment accommodations".
Part
02
of two
Part
02

COVID-19 - Industry Implications: Healthcare

Three ways in which the COVID-19 pandemic is going to affect the economy and day-to-day-operations in the healthcare industry are supply chain disruptions, the growth of telehealth, and the financial burden.


Supply Chain Disruptions

  • The COVID-19 pandemic will expose inefficiencies and high costs of procurement in the US healthcare industry
  • Additionally, it will emphasize the industry's dependence on Chinese suppliers of healthcare software and products such as face masks. Hospitals have to consider direct their providers but also those who supply raw materials.
  • As a result, healthcare organizations are forced to either look for replacements from countries not yet strongly affected by the pandemic or try to manage their current supply more efficiently.
  • Another direct impact on day-to-day operations is a surge in investments in critical protection devices. At the moment, hospitals are anticipating growth in demand and making purchases even if their budgets are tight.
  • It is likely that they will soon start settling for lower-quality products or even compromising sterilization standards.
  • However, the long-term impact on the industry and the economy may be positive. It can put an end to excessive spending and high waste in the healthcare industry, which steams from standardization issues and doctors' individual preference card needs.
  • At the same time, it may result in new sterilization protocols that will have a positive environmental impact.
  • Several US hospitals have already taken measures to reduce waste. They also discovered that their safety protocols are not sufficient and made changes to them.


Growth of Telemedicine

  • The COVID-19 outbreak is already contributing to growth in the telemedicine sector.
  • For example, a telehealth platform observed a 30% surge in visits compared to December. At Jefferson Health, the demand for remote visits increased twenty times.
  • The University of Pennsylvania in Philadelphia increased the number of practitioners that provide remote consulting from six to 60 but it still faces scheduling issues.
  • Also, the Centers for Medicare and Medicaid Services announced the expansion of telemedicine services under Medicaid "to curb the spread of coronavirus."
  • In light of the announcement, the American Medical Association urges federal and state decisionmakers to lessen restrictions for licensed medical professionals so they can increase their use of telemedicine.
  • Additionally, the Department of Health and Human Services' Office for Civil Rights stated that it will not penalize providers for using non-HIPAA-compliant telehealth technology during the COVID-19 pandemic.
  • As telemedicine is considered crucial in managing the outbreak, payers and providers are looking for efficient ways to leverage it. Oscar Health came up with an innovative testing solution, while two New York health plans partnered to provide joint telehealth services.
  • At the same time, the telehealth infrastructure is not prepared for such a surge in demand. Experts predict that the outbreak will speed up innovation in the sector.
  • Therefore, the long-term change that will impact the industry and the economy is the likely shift to telehealth, especially among home-care providers.
  • With changes to reimbursement models, it will contribute to savings in the healthcare industry. Additionally, telehealth startups are already the most well-funded ones in the digital health space. Therefore, it is likely that there will be more investments in this sector.

Financial Burden

  • The COVID-19 pandemic is likely to put a financial strain on healthcare organizations.
  • There are already issues around patient financial responsibility. While America's Health Insurance Plans has taken actions to lower out-of-pocket costs and providers are working on collecting strategies, it will be difficult to implement them during a crisis.
  • Additionally, with staff and equipment shortages, hospitals are forced to make difficult budgeting decisions. According to RevCycle Intelligence, those choices determine how the institution will handle the pandemic on a day-to-day basis and impact patient outcomes.
  • Long-term, the pandemic may cost up to $90 billion in insured medical expenses.
  • This may cause a disruption in healthcare insurance, as many providers will have to use their reserves. Also, as the costs of the pandemic could account for around 97% of insurance revenues, "it would result in a loss after factoring in administrative costs."


Sources
Sources