Hospitals across the country are busier than ever- and losing money.

As the coronavirus pandemic continues, hospitals have furloughed staff and cut salaries and retirement benefits. Beds are empty due to canceled elective procedures, and expenses have gone up as hospitals organize efforts to fight COVID-19. But a larger reason why hospitals are losing money is the way they are paid.

In STAT, instructor in Medicine at Beth Israel Deaconess Medical Center Zahir Kanjee, MD, associate professor of health care policy Ateev Mehrotra, MD, MPH, and professor of health care policy Bruce E. Landon, MD, MBA reveal how canceling lucrative services during the pandemic has put many hospitals in the red.

Hospital margins vary greatly across different types of care, with procedures like major joint replacements and colonoscopies bringing in large amounts of money. These profitable procedures help subsidize the care that causes hospitals to lose money, such as prolonged stays in the ICU. As hospitals cancel these lucrative procedures to free up staff and bed space for COVID patients, they are turned to almost exclusively unprofitable care.

The authors suggest fixing the imbalances in Medicare’s reimbursement schedule, as well as continuously updating prices of hospital procedures to prevent imbalances. They propose bolstering efforts to develop, refine, and test new payment models that provide incentives for cost-effective care.