2020 Hospital Operating Margins Down 96% Through July

https://www.prnewswire.com/news-releases/2020-hospital-operating-margins-down-96-through-july-301116888.html

Ship in a Storm | ICOExaminer

Hospital Operating Margins have plunged 96% since the start of 2020 in comparison with the first seven months of 2019, according to a new Kaufman Hall report, as uncertainty and volatility continue in the wake of the COVID-19 pandemic.

Those results do not include federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Even with that aid, however, Operating Margins are down 28% year-to-date compared to January-July 2019.

Operating Margins fell 2% year-over-year in July without the CARES Act relief, according to the latest edition of Kaufman Hall’s National Hospital Flash Report. Hospitals also saw flat year-over-year gross revenue performance in July, continued high per-patient expenses, and a fifth consecutive month of volumes falling below 2019 performance and below budget.

From June to July, however, hospital Operating Margins were up 24%, likely due to a backlog in demand resulting from the shutdown of many non-urgent services in the early months of the pandemic.

“COVID-19 has created a highly volatile operating environment for our nation’s hospitals and health systems,” said Jim Blake, managing director, Kaufman Hall. “Hospitals have shown some incremental signs of potential financial recovery in recent months. Unfortunately, there is no guarantee these trends will continue, and hospitals still have a long way to go to recover from devastating losses in the early months of the pandemic.”

July volumes continued to fall year-over-year, but showed some signs of potential recovery month-over-month. Adjusted Discharges were down 7% compared to July 2019, but up 6% compared to June 2020. Adjusted Patient Days were down 4% year-over-year, but up 7% month-over-month. Adjusted Discharges are down 13% and Adjusted Patient Days are down 11% since the start of 2020, compared to the first seven months of 2019.

Hospital Emergency Department (ED) volumes have been hardest hit, falling 17% year-to-date compared to the same period in 2019, down 17% year-over-year, and 13% below budget in July. Surgery volumes saw some gains with the continued resumption of non-urgent procedures pushing Operating Room Minutes up 3% month-over-month and 4% above budget in July, but they remain down 15% year-to-date.

Not including CARES Act relief, Gross Operating Revenues were essentially flat year-over-year and 2% below budget for the month, but have fallen 8% year-to-date compared to the same period in 2019. Inpatient Revenue is down 5% year-to-date and fell 3% below budget in July, but increased 1% year-over-year. Outpatient Revenue is down 11% year-to-date, 1% year-over-year, and 2% below budget.

Hospitals nationwide also continued to see higher per-patient expenses despite having fewer patients. Total Expense per Adjusted Discharge has jumped 16% year-to-date compared to the same seven-month period in 2019, and rose 9% year-over-year and 5% above budget in July. Labor Expense per Adjusted Discharge is up 18% year-to-date and rose 9% year-over-year and 5% above budget in July. Non-Labor Expense per Adjusted Discharge has increased 15% during the first seven months of 2020 and jumped 11% year-over-year and was 5% above budget for the month.

The National Hospital Flash Report draws on data from more than 800 hospitals.

 

 

 

 

Providence posts $538M loss, lays out 3-part strategic plan

https://www.beckershospitalreview.com/finance/providence-posts-538m-loss-lays-out-3-part-strategic-plan.html?utm_medium=email

Providence St. Joseph Health Consolidates 14 Hospitals in SoCal ...

Providence, a 51-hospital system based in Renton Wash., received $651 million in federal grants in the first half of this year, but it wasn’t enough to offset the system’s losses tied to the COVID-19 pandemic. 

The health system reported revenues of $12.5 billion in the first six months of this year, down from $12.6 billion in the same period a year earlier, according to financial documents released Aug. 17. Though the health system reported a rebound in patient volumes after the suspension of non-emergency procedures in March and April, net patient service revenue was down 10 percent year over year.

Providence’s expenses also increased. For the first two quarters of this year, the health system reported operating expenses of $12.7 billion, up 3 percent year over year. The increase was attributed to higher labor costs and increased personal protective equipment and pharmaceutical spend.

Reduced patient volumes combined with increased costs drove an operating loss of $221 million in the first half of this year. In the first half of 2019, Providence reported operating income of $250 million.

After factoring in nonoperating items, Providence ended the first six months of 2020 with a net loss of $538 million, compared to net income of $985 million in the same period of 2019.

To help offset financial damage, Providence received $651 million in federal grants made available under the Coronavirus Aid, Relief and Economic Security Act. 

“We knew we were in for a marathon the moment we admitted our first patient with COVID-19 seven months ago,” Providence President and CEO Rod Hochman, MD, said in an earnings release. “Our caregivers have been on the front lines ever since, and we are incredibly proud and grateful for all they are doing to serve our communities during the greatest crisis of our lifetime.”

In its earnings release, Providence mapped out a three-part plan for the future. As part of that plan, the system said it is focused on improving testing capacity and turnaround times and advancing clinical research and best practices in the treatment of COVID-19. The system is also revising its operating model and cost structure. 

 

 

Industry Voices—6 ways the pandemic will remake health systems

https://www.fiercehealthcare.com/hospitals/industry-voices-6-ways-pandemic-will-remake-health-systems?mkt_tok=eyJpIjoiTURoaU9HTTRZMkV3TlRReSIsInQiOiJwcCtIb3VSd1ppXC9XT21XZCtoVUd4ekVqSytvK1wvNXgyQk9tMVwvYXcyNkFHXC9BRko2c1NQRHdXK1Z5UXVGbVpsTG5TYml5Z1FlTVJuZERqSEtEcFhrd0hpV1Y2Y0sxZFNBMXJDRkVnU1hmbHpQT0pXckwzRVZ4SUVWMGZsQlpzVkcifQ%3D%3D&mrkid=959610

Industry Voices—6 ways the pandemic will remake health systems ...

Provider executives already know America’s hospitals and health systems are seeing rapidly deteriorating finances as a result of the coronavirus pandemic. They’re just not yet sure of the extent of the damage.

By the end of June, COVID-19 will have delivered an estimated $200 billion blow to these institutions with the bulk of losses stemming from cancelled elective and nonelective surgeries, according to the American Hospital Association

A recent Healthcare Financial Management Association (HFMA)/Guidehouse COVID-19 survey suggests these patient volumes will be slow to return, with half of provider executive respondents anticipating it will take through the end of the year or longer to return to pre-COVID levels. Moreover, one-in-three provider executives expect to close the year with revenues at 15 percent or more below pre-pandemic levels. One-in-five of them believe those decreases will soar to 30 percent or beyond. 

Available cash is also in short supply. A Guidehouse analysis of 350 hospitals nationwide found that cash on hand is projected to drop by 50 days on average by the end of the year — a 26% plunge — assuming that hospitals must repay accelerated and/or advanced Medicare payments.

While the government is providing much needed aid, just 11% of the COVID survey respondents expect emergency funding to cover their COVID-related costs.

The figures illustrate how the virus has hurled American medicine into unparalleled volatility. No one knows how long patients will continue to avoid getting elective care, or how state restrictions and climbing unemployment will affect their decision making once they have the option.

All of which leaves one thing for certain: Healthcare’s delivery, operations, and competitive dynamics are poised to undergo a fundamental and likely sustained transformation. 

Here are six changes coming sooner rather than later.

 

1. Payer-provider complexity on the rise; patients will struggle.

The pandemic has been a painful reminder that margins are driven by elective services. While insurers show strong earnings — with some offering rebates due to lower reimbursements — the same cannot be said for patients. As businesses struggle, insured patients will labor under higher deductibles, leaving them reluctant to embrace elective procedures. Such reluctance will be further exacerbated by the resurgence of case prevalence, government responses, reopening rollbacks, and inconsistencies in how the newly uninsured receive coverage.

Furthermore, the upholding of the hospital price transparency ruling will add additional scrutiny and significance for how services are priced and where providers are able to make positive margins. The end result: The payer-provider relationship is about to get even more complicated. 

 

2. Best-in-class technology will be a necessity, not a luxury. 

COVID has been a boon for telehealth and digital health usage and investments. Two-thirds of survey respondents anticipate using telehealth five times more than they did pre-pandemic. Yet, only one-third believe their organizations are fully equipped to handle the hike.

If healthcare is to meet the shift from in-person appointments to video, it will require rapid investment in things like speech recognition software, patient information pop-up screens, increased automation, and infrastructure to smooth workflows.

Historically, digital technology was viewed as a disruption that increased costs but didn’t always make life easier for providers. Now, caregiver technologies are focused on just that.

The new necessities of the digital world will require investments that are patient-centered and improve access and ease of use, all the while giving providers the platform to better engage, manage, and deliver quality care.

After all, the competition at the door already holds a distinct technological advantage.

 

3. The tech giants are coming.

Some of America’s biggest companies are indicating they believe they can offer more convenient, more affordable care than traditional payers and providers. 

Begin with Amazon, which has launched clinics for its Seattle employees, created the PillPack online pharmacy, and is entering the insurance market with Haven Healthcare, a partnership that includes Berkshire Hathaway and JPMorgan Chase. Walmart, which already operates pharmacies and retail clinics, is now opening Walmart Health Centers, and just recently announced it is getting into the Medicare Advantage business.

Meanwhile, Walgreens has announced it is partnering with VillageMD to provide primary care within its stores.

The intent of these organizations clear: Large employees see real business opportunities, which represents new competition to the traditional provider models.

It isn’t just the magnitude of these companies that poses a threat. They also have much more experience in providing integrated, digitally advanced services. 

 

4. Work locations changes mean construction cost reductions. 

If there’s one thing COVID has taught American industry – and healthcare in particular – it’s the importance of being nimble.

Many back-office corporate functions have moved to a virtual environment as a result of the pandemic, leaving executives wondering whether they need as much real estate. According to the survey, just one-in-five executives expect to return to the same onsite work arrangements they had before the pandemic. 

Not surprisingly, capital expenditures, including new and existing construction, leads the list of targets for cost reductions.

Such savings will be critical now that investment income can no longer be relied upon to sustain organizations — or even buy a little time. Though previous disruptions spawned only marginal change, the unprecedented nature of COVID will lead to some uncomfortable decisions, including the need for a quicker return on investments. 

 

5. Consolidation is coming.

Consolidation can be interpreted as a negative concept, particularly as healthcare is mostly delivered at a local level. But the pandemic has only magnified the differences between the “resilients” and the “non-resilients.” 

All will be focused on rebuilding patient volume, reducing expenses, and addressing new payment models within a tumultuous economy. Yet with near-term cash pressures and liquidity concerns varying by system, the winners and losers will quickly emerge. Those with at least a 6% to 8% operating margin to innovate with delivery and reimagine healthcare post-COVID will be the strongest. Those who face an eroding financial position and market share will struggle to stay independent..

 

6. Policy will get more thoughtful and data-driven.

The initial coronavirus outbreak and ensuing responses by both the private and public sectors created negative economic repercussions in an accelerated timeframe. A major component of that response was the mandated suspension of elective procedures.

While essential, the impact on states’ economies, people’s health, and the employment market have been severe. For example, many states are currently facing inverse financial pressures with the combination of reductions in tax revenue and the expansion of Medicaid due to increases in unemployment. What’s more, providers will be subject to the ongoing reckonings of outbreak volatility, underscoring the importance of agile policy that engages stakeholders at all levels.

As states have implemented reopening plans, public leaders agree that alternative responses must be developed. Policymakers are in search of more thoughtful, data-driven approaches, which will likely require coordination with health system leaders to develop flexible preparation plans that facilitate scalable responses. The coordination will be difficult, yet necessary to implement resource and operational responses that keeps healthcare open and functioning while managing various levels of COVID outbreaks, as well as future pandemics.

Healthcare has largely been insulated from previous economic disruptions, with capital spending more acutely affected than operations. But the COVID-19 pandemic will very likely be different. Through the pandemic, providers are facing a long-term decrease in commercial payment, coupled with a need to boost caregiver- and consumer-facing engagement, all during a significant economic downturn.

While situations may differ by market, it’s clear that the pre-pandemic status quo won’t work for most hospitals or health systems.

 

 

 

10 best, worst states for healthcare in 2020

https://www.beckershospitalreview.com/rankings-and-ratings/10-best-worst-states-for-healthcare-in-2020-080320.html

2020's Best & Worst States for Health Care

Americans in Massachusetts receive the best healthcare in the country, while those in Georgia receive the worst, according to an analysis by WalletHub, a personal finance website. 

To identify the best and worst states for healthcare, analysts compared the 50 states and the District of Columbia across 44 different measures of healthcare cost, access and outcomes. The metrics ranged from average hospital expenses per inpatient day to share of patients readmitted to hospitals. Read more about the methodology here.

Here are the 10 states with the highest overall rank across cost, access and outcomes, according to the analysis: 

1. Massachusetts

2. Minnesota

3. Rhode Island

4. District of Columbia

5. North Dakota

6. Vermont

7. Colorado

8. Iowa

9. Hawaii

10. South Dakota

Here are the bottom 10 states on healthcare cost, access and outcomes combined:

1. Georgia

2. Louisiana

3. Alabama

4. North Carolina

5. Mississippi

6. Arkansas

7. Tennessee

8. South Carolina

9. Texas

10. Alaska

Access the full list here

 

 

 

 

8 hospitals closing departments, ending services

https://www.beckershospitalreview.com/patient-flow/8-hospitals-closing-departments-ending-services.html?utm_medium=email

Several healthcare organizations recently closed medical units or terminated services to shore up finances, focus on more in-demand services or prevent patient care lapses. Here are eight that have announced or completed closures in the last three weeks:

1. As part of a systemwide strategy, Cleveland-based University Hospitals plans to consolidate its birthing services and its cardiac surgery program. University Hospitals Elyria (Ohio) Medical Center will end labor and delivery services in the next few months. University Hospitals St. John Medical Center in Westlake, Ohio, will end its heart surgery program.

2. St. Albans, Vt.-based Northwestern Medical Center will stop providing addiction treatment services by the end of the month in a cost-saving move. The hospital said that it will close the department because it was spending more on addiction treatment than it was making.

3. Kansas City, Mo.-based Saint Luke’s Health System ended inpatient care at Saint Luke’s Cushing Hospital in Leavenworth, Kan., on July 17.

4. In an effort to consolidate services and cut costs, Jersey City, N.J.-based Christ Hospital said it will close its OB-GYN department by July 31.

5. WellSpan Waynesboro (Pa.) Hospital plans to close its birthing unit and end inpatient pediatric services on Sept. 18, the organization announced in July.

6. New York City-based Montefiore Health System is scaling back services at Mount Vernon (N.Y.) Hospital. In early July, Montefiore shut down the intensive care unit at the hospital and laid off 18 nurses. The ICU closure comes after the 121-bed hospital ended obstetrics, pediatrics, cardiology and oncology services.

7. In a cost-cutting move, Seattle Children’s said it will shut down its day care center that employees use for their kids.

8. Ashtabula (Ohio) County Medical Center plans to close its birthing unit by Aug. 1, according to the Star Beacon. The Ohio Nurses Association has filed a lawsuit to prevent the shutdown.

 

 

 

 

6 months in: What will the new normal look like for hospitals?

https://www.healthcaredive.com/news/6-months-in-new-normal-hospitals-covid/581524/

Experts say a sustained state of emergency is likely until there is a cure or vaccine for COVID-19.

The first U.S. hospital to knowingly treat a COVID-19 patient was Providence Regional Medical Center in Everett, Washington, on Jan. 20. Since then, every aspect of healthcare has been upended, and it’s becoming increasingly clear all parts of society will have to adapt to a new baseline for the foreseeable future.

For hospitals and doctors’ offices, that means building on a major shift to telemedicine, new workflows to allow for more infection control and revamping the supply chain for pharmaceuticals, personal protective equipment and other supplies. That’s on top of ongoing challenges of burned out workers and staff shortages further exacerbated by the pandemic.

Looking out even further, the industry will have to figure out how to treat potential chronic conditions in COVID-19 survivors and, until an effective vaccine is developed, how to manage new outbreaks of the disease.

Experts say U.S. hospitals are generally in a much better position for dealing with COVID-19 now than they were in March, and providers are learning more every week about the best treatments and care practices.

June survey of healthcare executives conducted by consultancy firm Advis found that 65% of respondents said the industry is prepared for a fall or winter surge, about the inverse of what an earlier survey with that question showed.

“We’ve evolved. We’re in a much better state now than we were in the beginning of the pandemic,” Michael Calderwood, associate chief quality officer at Dartmouth-Hitchcock Medical Center, told Healthcare Dive. “There’s been a lot of learning.”

But the number of positively identified cases has now topped 4 million, and little political will exists to reinstitute widespread shutdowns even in areas where surges have filled ICUs to capacity. No treatment or vaccine for the disease exists or appears imminent. Testing and contract tracing efforts are too few and remain scattered and uncoordinated.

Whether there is a clear nationwide second wave or smaller surges in various parts of the country at different times, hospitals will need to remain in an effective state of emergency that requires constant vigilance until there is a cure or vaccine.

“Until we’re armed with that, we’re always going to have to be working like this. I don’t see any other way,” Diane Alonso, director of Intermountain Healthcare’s abdominal transplant program, told Healthcare Dive.

The fall will bring additional challenges. Flu season usually begins to ramp up in October, and if the strains in wide circulation this year are severe, that will further stress the health system. While some schools have announced they will be virtual-only for the rest of 2020, others are committed to in-person classes. That could mean increased community spread, especially in college towns. Colder weather that forces people indoors — where the novel coronavirus is far more likely to spread — will also be a complicating factor.

So far, hospitals have been reluctant to once again halt elective procedures, though some have had to, arguing that the care is still necessary and can be done safely when the proper protections are in place. But that doesn’t mean volume will rebound to pre-pandemic levels.

“While we think demand will come back, we’ve seen some flattening on demand in certain aspects that may be the new indicator of the new norm in terms of how people seek care,” Dion Sheidy, a partner and healthcare advisory leader at advisory firm KPMG, told Healthcare Dive.

Accelerating trends to provide care outside hospitals

When the number of COVID-19 cases first surged in the U.S. and stay-at-home orders were implemented nationwide, telehealth became a necessary way for urgent care to continue.

Virtual visits skyrocketed in March and April as CMS and private payers relaxed regulations and expanded coverage. Some of that will be rolled back, but much may persist as patients and providers grow more used to using telehealth and platforms become smoother.

Virtual care can’t replace in-person care, of course, and some patients and doctors will prefer face-to-face visits. The middle- to long-term result is likely to be that telehealth thrives for some specialties like psychiatry, but drops substantially from the highest levels during shutdowns throughout the country.

Other care settings outside of the hospital may see upticks as well, including at-home and retail-based primary and urgent care.

Renee Dua, the CMO of home healthcare and telemedicine startup Heal, said the company has seen virtual visits increase eight fold since the pandemic began in the U.S. and a 33% increase in home visits as people seek to continue care while reducing their risk of exposure to the coronavirus.

“The idea that you do not use an office building to get care — that’s why we started Heal — we bet on the fact that the best doctors come to you,” Dua told Healthcare Dive.

And care does need to continue, particularly vital services like vaccinations and pediatric checkups.

“You cannot ignore preventive screenings and primary care because you can get sick with cancer or with infectious diseases that are treatable and preventable,” Dua said.

Movements toward non-traditional settings existed before anyone had heard of COVID-19, but the realities of the pandemic have shifted resources and spurred investment that will have lasting effects, Ross Nelson, healthcare strategy leader at KPMG, told Healthcare Dive.

“What we’re going to see is there going to be an acceleration of the underlying trends toward home and away from the hospital,” he said.

Some of this was already underway. Multiple large health systems have established programs to provide hospital-level care at home and major employers have inked contracts to have primary care delivered to employees at on-site clinics.

PPE, staff shortages lingering

A key problem for hospitals in the first COVID-19 hotspots, such as Washington state and New York City, was a lack of necessary personal protective equipment, including N95 masks, gowns, face shields and gloves.

Also running low were supplies like ventilators and some drugs necessary for putting people on those machines.

While advances have certainly been made, the country did not have enough time to build up those supply stores before new surges in the South and West. The result has been renewed worries that not enough PPE is available to keep healthcare workers safe.

Chaun Powell, group vice president of strategic supplier engagement at group purchasing organization Premier, said “conservation practices continue to be the key to this” as COVID-19 surges roll through the country. The longer those dire situations continue, the more stress is put on the supply chain before it has a chance to recover.

Premier’s most recent hospital survey found that more than half of respondents said N95s were heavily backordered. Almost half reported the same for isolation gowns and shoe covers.

Calderwood said there has been improvement, however. “We have a much longer days-on-hand PPE supply at this point and the other thing is, we’ve begun to manufacture some of our own PPE,” he said. “That’s something a number of hospitals have done in working with local companies.”

But the ability to manufacture new PPE in the U.S. also depends on the availability of raw materials, which are limited. That means significant advancements in domestic production are likely several months away, Powell said.

Health systems have stepped up the ability to coordinate and attempt to get equipment where it’s needed most, especially for big-ticket items like ventilators. Providers are more hesitant, however, to let go of PPE without the virus being better contained.

The backstop supposed to help hospitals during a crisis is the national stockpile, which the federal government is attempting to resupply. It doesn’t appear to be enough, though, at least not yet, Calderwood said.

“One thing that concerns me is we did have a national stockpile of PPE, and I get the sense that we’ve kind of burned through that supply,” he said. “And now we’re relying on private industry to meet the need.”

Another problem hospitals face as the pandemic drags on is maintaining adequate staffing levels. Doctors, nurses and other front-line employees are in incredibly stressful work environments. The great potential for burnout will exacerbate existing shortages, just as medical schools are still trying to figure out how to continue with training and education.

“Those areas are concerning to our hospitals because our hospitals depend on a whole myriad of medical staff,” Advis CEO Lyndean Brick said. “Whether it’s physicians, nurses, technicians, housekeepers — that whole staff complement is what’s at the core of healthcare. You can have all the technology in the world but if you don’t have somebody to run it that whole system falls apart.”

On top of that is the increase in labor strife as working conditions have deteriorated in some cases. Nurses have reported fearing for their safety among PPE shortages and alleged lapses in protocol. Brick said she expects strike threats and other actions to continue.

Changing workflows

When COVID-19 cases started ramping up for the first time in the U.S., hospitals throughout the country, acting on CMS advice, shut down elective procedures to prepare their facilities for a potential influx of critical patients with the disease. In some areas, hospitals did have to activate surge plans at that time. Others have done so more recently as the result of increases in the South and West.

But few have resorted to once again halting electives. Brick told Healthcare Dive she doesn’t expect that to change, mostly because hospitals have by and large figured out how to properly continue that care.

She trusts any that can’t do so safely, won’t try.

For the majority of our providers, except in the occasional state where they’re having a real problem right now, I think that we’re going to see elective surgeries still continue,” Brick said. “Because most of our hospitals have capacity right now. They’re able to do this successfully and securely, and it’s really detrimental to patients to not get the care that they need.”

Hospitals rely on elective procedures to drive their revenue, an added motivation to find ways to keep them running even when COVID-19 is detected at greater levels in the community.

Intermountain, based in Salt Lake City, recently performed its 100th organ transplant of the year, ahead of last year’s pace despite the disruption of the COVID-19 crisis.

Alonso, the program director for abdominal transplants, said that while transplants are considered essential services, staff did pause some procedures when electives were halted and have re-evaluated workflow to be as safe as possible to patients, who are at higher risk after surgery because they are immunocompromised.

The hospital developed a triage system to help evaluate what services are necessary based on what level of COVID-19 spread is present in the community and how many beds and staffers are available to treat them.

The system’s main hospital has certain floors and employees designated for COVID-19 treatment. Staff have been reallocated for certain needs like testing and there are plans available if doctors and surgeons need to be deployed to the ICU.

As many outpatient visits as possible are being changed to virtual, but in the building, patients are screened for symptoms and required to wear masks and follow distancing protocols.

At the transplant center, doctors were at one point divided into teams in case someone got sick and coworkers had to self-isolate.

“We went through a dry run where, at the beginning, we shut down incredibly hard to see how we could do it operationally,” Alonso said. Intermountain hasn’t had to do that again, but is ready if such measures become necessary, she said.

Brick and others said that despite the genuinely frightening circumstance brought by the pandemic, hospitals’ responses have been admirable and providers have been quick to adapt. Slow or nonexistent leadership at the federal level, especially in sourcing and obtaining PPE, has been the bigger roadblock.

“Across the board, the whole healthcare industry has responded beautifully to this,” Brick said. “Where our country has fallen down is we don’t have a master plan to deal with this. Our federal leadership is reactionary, and we are not coordinating a master plan to deal with this in the long term. That’s where my concerns are at. My concerns are not at our local hospitals. They have their acts together.”

 

 

 

 

Canceled elective procedures putting pressure on nation’s hospitals

https://www.healthcarefinancenews.com/news/canceled-elective-procedures-putting-pressure-nations-hospitals

U.S. Hospitals Brace for 'Tremendous Strain' from New Virus - JEMS

Even upticks in COVID-19 patients haven’t made up for the revenue losses, since reimbursement for those services is comparatively slim.

Elective procedures are in a strange place at the moment. When the COVID-19 pandemic started to ramp up in the U.S., many of the nation’s hospitals decided to temporarily cancel elective surgeries and procedures, instead dedicating the majority of their resources to treating coronavirus patients. Some hospitals have resumed these surgeries; others resumed them and re-cancelled them; and still others are wondering when they can resume them at all.

In a recent HIMSS20 digital presentation, Reenita Das, a senior vice president and partner at Frost and Sullivan, said that during the pandemic, plastic surgery activity declined by 100%, ENT surgeries declined by 79%, cardiovascular surgeries declined by 53% and neurosurgery surgeries declined by 57%.

It’s hard to overstate the financial impact this is likely to have on hospitals’ bottom lines. Just this week, American Hospital Association President and CEO Rick Pollack, pulling from Kaufman Hall data, said the cancellation of elective surgeries is among the factors contributing to a likely industry-wide loss of $120 billion from July to December alone. When including data from earlier in the pandemic, the losses are expected to be in the vicinity of $323 billion, and half of the nation’s hospitals are expected to be in the red by the end of the year.

Doug Wolfe, cofounder and managing partner of Miami-based law firm Wolfe Pincavage, said this has amounted to a “double-whammy” for hospitals, because on top of elective procedures being cancelled, the money healthcare facilities received from the federal Coronavirus Aid, Relief, and Economic Security Act was an advance on future Medicare payments – which is coming due. While hospitals perform fewer procedures, they will now have to start paying that money back.

All hospitals are hurting, but some are in a more precarious position than others.

“Some hospital systems have had more cash on hand and more liquidity to withstand some of the financial pressure some systems are facing,” said Wolfe. “Traditionally, the smaller hospital systems in the healthcare climate we face today have faced a lot more financial pressure. They’re not able to control costs the same way as a big system. The smaller hospitals and systems were hurting to begin with.”

LOWER REVENUE, HIGHER COSTS

Some hospitals, especially ones in hot spots, are seeing a surge in COVID-19 patients. While this has kept frontline healthcare workers scrambling to care for scores of sick Americans, COVID-19 treatments are not reimbursed at the same level as surgeries. Hospital capacity is being stretched with less lucrative services.

“Some hospitals may be filling up right now, but they’re filling up with lower-reimbursing volume,” said Wolfe. “Inpatient stuff is lower reimbursement. It’s really the perfect storm for hospitals.”

John Haupert, CEO of Grady Health in Atlanta, Georgia, said this week that COVID-19 has had about a $115 million negative impact on Grady’s bottom line. Some $70 million of that is related to the reduction in the number of elective surgeries performed, as well as dips in emergency department and ambulatory visits. 

During one week in March, Grady saw a 50% reduction in surgeries and a 38% reduction in ER visits. The system is almost back to even in terms of elective and essential surgeries, but due to a COVID-19 surge currently taking place in Georgia, it has had to suspend those services once again. ER visits have only come back about halfway from that initial 38% dip, and the system is currently operating at 105% occupancy.

“Part of what we’re seeing there is reluctance from patients to come to hospitals or seek services,” said Haupert. “Many have significantly exacerbated chronic disease conditions.”

Patient hesitation has been an ongoing problem, as has the associated cost of treating coronavirus patients, said Wolfe.

“When they were ramping up to resume the elective stuff, there was a problem getting patients comfortable,” he said. “And the other thing was that the cost of treating patients in this environment has gone up. They’ve put up plexiglass everywhere, they have more wiping-down procedures, and all of these things add cost and time. They need to add more time between procedures so they can clean everything … so they’re able to do less, and it costs more to do less. Even when elective procedures do resume, it’s not going back to the way it was.”

Most hospitals have adjusted their costs to mitigate some of the financial hit. Even some larger systems, such as 92-hospital nonprofit Trinity Health in Michigan, have taken to measures such as laying off and furloughing workers and scaling back working hours for some of its staff. At the top of the month, Trinity announced another round of layoffs and furloughs – in addition to the 2,500 furloughs it announced in April – citing a projected $2 billion in revenue losses in fiscal year 2021, which began on June 1.

Hospitals are at the mercy of the market at the moment, and Wolfe anticipates there could be an uptick in mergers and consolidation as organizations look to partner with less cash-strapped entities. 

“Whether reorganization will work remains to be seen, but there will definitely be a fallout from this,” he said.

 

 

 

 

Why COVID-19’s biggest impact on healthcare may not be until 2022

https://www.healthcaredive.com/news/why-covid-19s-biggest-impact-on-healthcare-may-not-be-until-2022/582129/

This perfect storm of a shift in payer mix, the impending insolvency of Medicare and the inability of states to absorb the growing costs of Medicaid represent a tsunami of challenges.

With COVID-19 there has been unprecedented stress placed upon the healthcare system. The human and financial toll of the current crisis has been extraordinary. Yet, little attention has been focused on the impact of this virus on the viability of our healthcare financing system.

Three significant shifts in healthcare financing are occurring as a result of the pandemic’s economic impact. First, as a result of job losses, there will be a shift in commercial insurance to government-funded insurance programs. Second, revenue for funding Medicare, based on payroll taxes, will be significantly decreased. Finally, states will have less tax revenue to pay for Medicaid, threatening the viability of this program as well.

More than 30 million Americans have filed for unemployment since the start of the COVID-19 pandemic. According to a recent report, about 27 million people may lose their employer-sponsored insurance. 

This will result in millions of people seeking coverage through Medicaid programs, the individual marketplace or simply becoming uninsured. Healthcare providers have relied upon margins from commercial insurance to offset costs from poorer reimbursing government funded programs and uncompensated care.

With more than 156 million Americans receiving employer sponsored insurance at the start of this year, and given recent projected job losses, providers may see a 17% shift in payer mix. The reliance on commercial insurance and cost shifting has become a necessary way for providers to financially sustain operations. 

With a 35% margin with commercial insurance compared to Medicare, a 17% shift in payer mix on a trillion dollar spend would result in a substantial reduction in financial resources available to hospitals.

Almost half of healthcare expenditures already come from government programs. Medicare, the largest of these programs, is principally supported by taxes on payroll and social security benefits. With COVID-related job losses there will be a corresponding reduction in payroll tax revenues to the Medicare system. Reports from the Congressional Research Service submitted to Congress in May, with data used prior to COVID-19, projected that Medicare would become insolvent in 2026.

Analyses performed show that there will be a gap in Medicare revenues during the next three years (from the pre-COVID projections) of close to $150 billion. The result is that Medicare will become insolvent as early as 2022. Even by applying more conservative projections, such as recovering all job losses by the end of 2020 and payroll tax revenue holding steady at pre-COVID levels, Medicare still becomes insolvent in 2023.

State revenues, too, will be under real pressure with reduced tax revenues resulting from the current economic downturn. Medicaid programs are supported in part by federal funds, but also from general funds from the state. 
On average, states are projecting about a 10% reduction in revenues in 2020, rising to almost a 25% reduction in 2021. Even without considering the growth in Medicaid enrollment hitting states, this reduced tax revenue will make sustaining current Medicaid program funding increasingly difficult.

This perfect storm of a shift in payer mix, the impending insolvency of Medicare by 2022 and the inability of states to absorb the growing costs of Medicaid represent a tsunami of challenges for the health system. Looking at this new reality, it is clear that our system for financing healthcare is severely broken and we must identify solutions to sustain access to medical care for our citizens.

This will be a challenge of a generation and we will need strength, courage and bold ideas to get through this. Pandemics have a way of changing a society’s political, economic and sociologic outlooks, and COVID-19 will be no different. 

 

 

 

American patients can’t shop their way to a low cost healthcare system

American patients can’t shop their way to a low cost healthcare system

Hospital price transparency is a distraction from policies that could reduce costs without burdening patients, say Jamie Daw and Adam Sacarny.

 

The prices that hospitals charge privately insured patients in the US have long been shrouded in secrecy. These prices—which are negotiated between hospitals and private insurers—vary widely: the price for the same blood test could vary 39-fold within Tampa, Florida and the cost of a cesarean delivery varies by up to $24 000 in San Francisco, California.

A recent federal court decision stands to shine a light on opaque hospital pricing in the US. In a lawsuit brought forward by the American Hospital Association, a federal judge upheld a regulation issued by the Trump administration that will soon require hospitals to post a wealth of information on payment rates online.

This policy seems intuitive: in other sectors of the economy, consumers usually know the price of a service or product before they purchase it. By comparing prices, consumers can shop around and save money. In turn, sellers anticipate that behavior and are incentivized to keep prices low. Who wouldn’t want a virtuous circle like that in healthcare? 

The Trump administration argues that hospital price transparency will encourage value in healthcare by helping patients and employers find lower prices, while pressuring hospitals to cut them further. However, the potential effects—and who stands to benefit—are not so straightforward.

 

Firstly, giving consumers information on prices doesn’t necessarily mean that they will respond by seeking lower cost services. Studies have consistently found that patients tend not to use price transparency tools, and their effects on healthcare spending are small or nonexistent. Why? Shopping for healthcare services is often complicated or impossible. 

 

Many of the most expensive services are for emergencies where there is little scope for patients to shop.

Even when a patient has time to compare prices for non-urgent procedures or tests, the complexity of healthcare payment systems and insurance products makes it next to impossible for a patient to preemptively calculate what they would personally pay for an encounter. Establishing that amount requires patients to know the cost-sharing parameters of their insurance plan, the set of services they will use during the encounter, and how aggressively the hospital will bill for those services.

Insurance also obscures patients’ incentives to shop by insulating them from healthcare prices.

While patients can be given strong incentives to shop—and an increasing number of American workers are enrolled in high deductible health plans with this aim—these incentives are created by hoisting financial risk on patients. This financially burdens American families and can result in patients forgoing appropriate care.

 

Beyond the challenges posed by patient shopping, the empirical evidence supporting price transparency is weak.

It could even backfire. Economists have pointed out that in sectors with low competition, price transparency can facilitate collusion and lead to higher prices. This fear was borne out in Denmark when authorities began publishing the prices of ready-mixed cement. Prices proceeded to converge and rise, and the authorities eventually abandoned the idea. The most hopeful evidence in the US healthcare system comes from New Hampshire, where prices for medical imaging fell by 3% after the state established a price transparency website. But even effects of this magnitude, while beneficial, would only make a tiny dent in lowering US healthcare costs. 

 

Price transparency efforts reflect a broad trend for American policy makers to turn to consumer-driven strategies to reduce healthcare costs.

These strategies are built on the assumption that patients ought to be responsible for navigating their way to high quality, low cost healthcare. However, the challenges faced by patients in assessing the complex cost-quality tradeoffs in healthcare limit the potential for price transparency to have the impact that the administration advertises.

Perhaps more troubling is that these efforts could distract policy makers from addressing the main drivers of US healthcare prices, such as rapid and ongoing consolidation. Concentrated hospital markets are becoming the norm in the US and are strongly associated with higher prices. Antitrust actions, such as preventing hospital mergers, could reduce and reverse consolidation, likely leading to lower prices.

Another option for policy makers is to assume a greater regulatory role over healthcare prices, including introducing price caps and an all-payer rate setting. A Supreme Court decision made it much more difficult for state governments to collect the data that would undergird these efforts. As a result, the information released under the transparency rule may end up being more useful for states considering new price regulations than for patients shopping for healthcare services.

 

If we want to reduce prices without burdening patients with financial risk, then policy makers need to address the emerging causes of rising healthcare costs directly. Efforts to control costs are most likely to succeed when policy makers tackle the structural drivers behind the most expensive health system in the world.