Broker Check

Covid-19. Now What?

May 15, 2020
Share |

It’s unreal how threatening germs can be; a single infection quickly escalates into a worldwide pandemic. Hospitals overflowed, economies halted, and markets cratered. We live in some crazy times. Stress continues to be a concern, especially for healthcare workers risking their own health to save lives. There is hope that covid-19 is on a decline, yet there is the possibility of more waves. As vaccines and medical advancements persist, the hope is the covid-19 pandemic is being defeated and avoided in the future.

Yet, while we will eventually escape the covid-19 virus pandemic, its effects will be felt for many years. Here’s my thoughts on what to expect.

Hospitals and Healthcare

Currently, hospitals are built for profit, not necessarily to care for its community. This is neither a surprise nor a negative label; it takes a lot of money to run a hospital, and if a hospital loses too much money, it won’t be able to take care of anyone. If there are empty beds, a hospital typically loses money, so a hospital is usually built for how many beds it can continually keep full. We saw many hospitals shut down nearly everything except for covid-related cases and emergencies. In doing so, many healthcare workers were furloughed or saw less pay for more (and more dangerous) work. What happened to the administration of the hospitals? Nearly nothing. There was a hospital in my region that furloughed a significant number of physicians, nurses, and other healthcare workers, but no administration got furloughed. Some got up to a 20% pay decrease; some got bonuses. Unfortunately, I don’t think covid-19 will change anything with our current healthcare system. One of the major problems is that administration is a more significant expense than it ever has been in the healthcare infrastructure. Much of that, it seems, is due to the Affordable Care Act, which incentivized large hospitals to buy up private practices. If there are no more private practices, there is no competition, and patients have fewer choices of care. Now, profit is the primary purpose of healthcare, not the care itself. Hospital administration won’t decrease or self-select a furlough; it won’t go away anytime soon. As long as doctors aren’t allowed to direct a hospital, doctors and patients will suffer as a result.

Physician’s Salaries

There’s no such thing as a temporary tax. For example, the income tax was first proposed as a temporary tax to fund World War I; income tax is unconstitutional. Physician’s salaries are temporarily being lowered. Hospital administration work a lot like politicians. If lower physician salaries make hospitals more profitable, I think we’ll see the term “temporary” disappear. I don’t think doctors’ salaries will be cut in half, but I think we’ll see a 10-20% reduction across the board. This isn’t all bad, though. The current market is primed for the private practice physician right now. We’ll see doctor’s groups be established at a fast pace. It won’t be like it was in the 90s and 2000s, but I think there will be a mini revolt with physicians breaking off from large hospital systems, and this will be what ultimately brings physicians’ salaries back to normal.

The Economy

Besides the deaths and emotional hurt to families, the economy will be hurt the most due to covid-19. Small businesses dried up quickly in 2020, while large corporations got bigger. The government stimulus packages helped some of those in need, but the ultimate consequences of the stimulus package might be higher tax rates in the future. Our economy only works if people earn and spend money, and it will take significant time for businesses to get healthy again and for people to trust their employers not to furlough them at the worst possible time. It’s not all bad, though. I think we’ll see mini surges in the economy. The month of July in housing, for example, won’t be a normal July; July will include the lagging months of April plus May plus June. I think August and September will be the same until the housing market catches up from the covid-19 lag. These mini surges will ultimately be the path to a healed economy. We’ll likely see restaurants (even mediocre restaurants) all over town be perpetually full for months. People are craving social interaction, and I think it won’t be taken for granted for a while. All in all, I think 2020 will see positive growth by December, although the growth won’t be balanced by any means; the growth will occur in clusters and will be over-weighted in certain industries. If we can handle this first wave of covid-19 responsibly and diminish or eliminate a second wave altogether, there is a possibility of major economic surges in 2020 and 2021. With these potential surges, I think we’ll see some significant opportunities. The people who jumped to these opportunities at the right time will get rewarded the most. If second and third waves of covid-19 are just as devastating as the first, there’s no telling what to expect. Whether it’s an economic expansion or recession ahead, it’ll be unlike any other business cycle we’ve ever seen.