COVID-19 and The Financial Storm Ahead For Providers

By Pete Bekas, director of product consulting, MedeAnalytics.

Pete Bekas

COVID-19 has taken a significant toll on our nation’s health system. In hard-hit cities like New York and Chicago, we watched makeshift hospitals open, military hospital ships deployed to support overflow patients, and operating rooms turned into intensive care unit rooms.

While providers focus on treating coronavirus patients, the lack of other services, such as outpatient surgeries, radiology services and other procedures, is resulting in extreme revenue loss.

Across the country, healthcare organizations are seeing 40% to 80% declines in monthly charges with some of the most profitable services lines only seeing 20% of their normal monthly volumes during the pandemic.

As we live with social distancing and providers continue to follow guidelines from professional associations to postpone and cancel non-urgent cases, healthcare organizations are just now starting to see the financial impact that COVID-19 is having on their organizations. We know that it takes payers approximately 35 days to process and pay claims. This processing time means organizations are about to enter financially-troubling times.

To add to the financial stress of diminishing volume of elective cases, organizations are seeing clinical staff contract the coronavirus or need self-quarantine because of symptoms. This requires healthy staff to put in longer hours resulting in overtime, which adds to the cost to care for those who need it the most.

Pay cuts, furloughs and layoffs have caused more even more stress within the healthcare sector. These actions have been taken in departments that have seen their patient volumes cut in half. Many physicians have seen cuts to their paychecks as organizations take drastic measures to conserve cash as they look to weather to the financial storm that is only weeks away.

Federal Government Relief

In mid-April 2020, the U.S. Department of Health and Human Services started depositing money from the CARES Act. Approximately $100 billion in relief funds will be sent to hospitals and other healthcare providers. The initial $30 billion was distributed based on the Medicare fee-for-service payments to providers during 2019; approximately $62 was given to providers per $1,000 paid in 2019. (Organizations where Medicare is not a large payer may have received little or no financial help in the initial round of relief putting them in a more difficult situation.) Although these funds come at a much-needed time, the question is how long the money will help hospitals and providers, given we are nowhere close to being back to normal patient volumes.

Nevertheless, additional relief is said to be on its way. (CMS said it would offer advanced payments loans to providers; this has since been put on hold.) Recent legislation is looking to add additional relief funds for our fragile health system. The damage, unfortunately, has already been done and it will take quite a while to recover.

Getting Back to Normal

The individuals who most often use profitable healthcare services, such as outpatient surgery and radiology are believed to be at the highest risk of contracting the coronavirus. As states begin to remove stay-at-home orders and we return to the new normal, how long will patients continue to defer medical services because of the fear of being exposed to the coronavirus?

The expected pent-up demand for services is expected to be quickly depleted, and volume will take months to return to historical levels. The impact on an organization’s cash flow will be seen through the rest of 2020 and potentially into 2021.

Organizations, now more than ever, must have insights into the revenue cycle and cash forecasting to help them weather the very choppy financial waters that are ahead.

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