Category Archives: Credit Ratings

Medicaid expansion key indicator for rural hospitals’ financial viability

Posted on by • Posted in 2020 Election Issues, ACA, Credit, Credit Quality, Credit Ratings, Creditors, Critical Access Hospitals, Financial Viability, Financially Distressed, Health Policy, Health System, Hospital, Hospital Bailout Funding, Hospital Bankruptcy, Hospital Closure, Medicaid, Medicaid Expansion, Pricing, Rural Health, Rural Hospital, Standby Capacity • Leave a comment

https://www.healthcaredive.com/news/medicaid-expansion-rural-hospitals-health-affairs/579005/

Hospital Closures, Underfunded Health Centers In Ohio Valley ...

Dive Brief:

  • Struggling rural hospitals are faring better financially in states that expanded Medicaid under the Affordable Care Act, according to a new Health Affairs study examining 1,004 rural hospitals’ CMS cost reports submitted from 2011 to 2017.
  • Among rural, nonprofit critical access hospitals in states that expanded Medicaid, the median overall margin increased from 1.8% to 3.7%, while it dropped from 3.5% to 2.8% in states that did not expand the program.
  • Tax-exempt status played another key role in determining rural hospitals’ financial viability. During the study period, the median overall profit margin at nonprofit critical access hospitals rose from 2.5% to 3.2%, while it dropped among for-profit operators from 3.2% to 0.4%.

Dive Insight:

The unprecedented financial distress mega health systems are under amid the ongoing pandemic is all too familiar to rural hospitals.

These systems are often smaller, employing fewer specialists and less medical technology, thus limiting the variety of services they can provide and profit on. They remain the closest point of care for millions of Americans, yet face rising closures.

The good news is that most rural hospitals are nonprofit, the designation that fared best in Health Affairs’ six-year study. More than 80% of the 1,004 private, rural hospitals analyzed in the study were nonprofit, while 17% were for-profit.

But researchers found Medicaid expansion played a key role in rural hospitals’ financial viability during the study period, with closures occurring more often in the South than in other regions.

Thirty-seven states have expanded Medicaid under the ACA, but 14 have not, and a majority of them are concentrated in the southern U.S., according to data from the Kaiser Family Foundation.

One of those states is Oklahoma, which on Monday withdrew its planned July 1 Medicaid expansion, citing a lack of funding.

Another factor researchers found positively associated with overall margins and financial viability was charge markups, or the charged amount for a service relative to the Medicare allowable cost. Hospitals with low-charge markups had median overall margins of 1.8%, while those with high-charge markups had margins at 3.5%.

The same is true for occupancy rates. In 2017, rural hospitals with low occupancy rates had median overall profit margins of 0.1% Those with high occupancy rates had margins of 4.7%.

That presents a unique challenge for rural hospitals. Reimbursements from public and private payers do not compensate for fixed costs associated with providing standby capacity, which is essential in rural communities, where few hospitals serve large geographic areas.

Since 1997, CMS has been granting rural hospitals — particularly those with 25 or fewer acute care inpatient beds and located more than 35 miles from another hospital — critical access status, reimbursing them at cost for treating Medicare patients.

In the Health Affairs study, critical access hospitals accounted for 21% of the rural hospital bed capacity, with the remaining 79% of bed capacity provided by noncritical access hospitals.

 

 

 

 

UPMC latest hospital system to report Q1 loss due to COVID-19

Posted on by • Posted in Cash, Cash Reserves, Cash-Flow Improvements, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Fear, Health Insurance Industry, Health System, Hospital, Hospital Industry, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue • Leave a comment

https://www.healthcaredive.com/news/upmc-latest-hospital-system-to-report-q1-loss-due-to-covid-19/578907/

Complaint: UPMC uses nonprofit dollars to build for-profit ...

Dive Brief:

  • UPMC reported a small operating loss but higher revenues for the quarter ending March 31. The Pittsburgh-based regional healthcare system attributed the red ink to the COVID-19 pandemic and suggested the next quarter could be even tougher.
  • The healthcare services division “experienced significant reductions in patient volumes during the last two weeks” of the quarter, representing about a $150 million loss in revenue for that time period, UPMC said in its unaudited financial statement posted Friday. The system said it is receiving about $255 million from the Coronavirus, Aid, Relief, and Economic Security Act.
  • UPMC’s health insurance plan also saw increased revenue due to a significant rise in its membership, but its operating income dropped by 56%.

 

Dive Insight:

UPMC, which operates 40 hospitals in Pennsylvania, New York and Ohio, has been growing steadily in recent years. However, its growth in the first quarter collided head-on with the COVID-19 pandemic.

The system posted a $41 million operating loss on revenues of $5.5 billion, according to the financial report. For the first quarter of 2019, it reported an operating profit of $44 million on revenue of $5.1 billion. The system did not disclose its net numbers.

Investment losses reached nearly $800,000, compared to a gain of more than $224,000 in the prior-year period.

While overall outpatient revenue increased 1% during the quarter, revenue from physician services was down 3% while hospital admissions and observations dropped by 4%.

UPMC is the latest nonprofit healthcare provider to report losses blamed on COVID-19, although its numbers are not as big as those reported by Kaiser Permanente and CommonSpirit Health, both of which reported quarterly losses exceeding $1 billion apiece.

UPMC did note in a statement that its business was moving back toward normal in recent weeks.

“During the COVID-19 crisis, UPMC’s leaders, scientists, clinicians and front-line workers throughout our … system were prepared to care for the potential surge of COVID-positive patients while also safely providing essential, life-saving care to our non-COVID patients,” Edward Karlovich, UPMC’s interim chief financial officer, said in a statement. “However, many patients who had scheduled surgeries and procedures before the crisis postponed their care. With assurances that all our facilities are safe for all patients and staff, we are seeing our patients returning for their essential care that had been postponed and our current volumes are beginning to approach near-normal levels.”

The system also noted that it was sitting on $7 billion in cash and liquid investments. It reported 99 days cash on hand.

UPMC’s insurance division remained in the black, but was under strain. Its operating income was $39 million — compared to $89 million for the first quarter of 2019. However, membership grew by 7% during the quarter to 3.8 million enrollees.

 

 

 

 

Sluggish patient volume could jeopardize hospitals repaying advanced Medicare funds, report suggests

Posted on by • Posted in Cash, Cash Reserves, Cash-Flow Improvements, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Emergency Care, Fear, Health System, Hospital, Hospital Industry, Market Outlook, Market Uncertainty, Medicare Advance Payments • Leave a comment

https://www.healthcaredive.com/news/outpatient-visits-rebounding-transunion-report/578894/

CMS Suspends Advance Payment Program to Clinicians for COVID-19

Dive Brief:

  • Though hospital volumes are expected to remain below pre-pandemic levels for quite some time, rebounding outpatient visits seem to be outpacing those for inpatient care or emergency department visits, according to a Transunion Healthcare survey of more than 500 hospitals.
  • During the week of May 10-16, outpatient visits were down 31% and emergency visits were down 40% compared to pre-COVID-19 levels. Inpatient volumes were down 20% and continue to trend upward, though at a slower rate than outpatient or ER visit volumes. Outpatient visits plunged between April 5 and 11, hitting a bottom of 64% down from typical volume.​
  • Baby boomers (born between 1944 and 1964) and the what the report calls the silent generation (born before 1944) are returning to ERs faster than younger generations. Millennials (born between 1980 and 1994) and Generation Z (born between 1995 and 2002) patients, however, are driving positive trends in inpatient and outpatient rebounds.

Dive Insight:

The report echos several others suggesting patients are still cautious about returning to the hospital and other care settings. The Kaiser Family Foundation found that the pandemic has forced nearly half of patients to postpone medical care. About 32% of those who have postponed care said they would get the service in the next three months and 10% said they will do so in four months to a year.

The overall sluggish outlook led Transunion to suggest patient volumes may not be restored to pre-pandemic levels soon enough to both sustain operational and clinical functions and repay advanced Medicare payments that many systems large and small have taken advantage of from CMS.

Because of the demographic trends, systems may have greater success scheduling appointments by checking in first with younger generations, the report suggests.

“We think as providers are beginning to really drive their patient engagement strategies that it’s best if they start reaching out to them, because it’s likely they’ll be willing to re-enter the care setting,” John Yount, vice president for TransUnion Healthcare, told Healthcare Dive.

Providers are taking steps to ease patient fears upon returning to medical settings by implementing temperature checks, spacing out waiting rooms to allow for social distancing and taking other safety measures.

But a sluggish recovery is still likely as patients plan to continue delaying care, especially older adults who are at higher risk for COVID-19 and in some states have been told to continue following stay at home orders.

The slowest return to growth in emergency room visits raises concerns that patients who need emergency care may be avoiding hospital settings due to COVID-19 fears, according to the report.

Older patients are leading the pack in returning to ERs, and they also experienced the largest decline in inpatient volumes from March 1-7 and April 5-11.

Comparatively, younger generations had smaller declines in visit activity overall and are returning to care settings faster, Yount said.

“These deferrals will have implications for both patients and providers — high-acuity and chronically-ill patients risk waiting too long to seek care, and a continued reduction in visit volume will further amplify existing financial challenges for hospitals,” David Wojczynski, president of TransUnion Healthcare, said in a statement.

 

 

 

 

 

Fitch Q2 outlook for nonprofit hospitals: ‘worst on record’

Posted on by • Posted in Cash, Cash Reserves, Cash-Flow Improvements, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Emergency Care, Fear, Financially Distressed, Health System, Hospital, Hospital Industry, Market Outlook, Market Uncertainty, Medicare Advance Payments, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue • Leave a comment

https://www.healthcaredive.com/news/fitch-analysts-hospital-worries-FY-2020/577875/

7 Ways to Survive a Cash Flow Crunch | SCORE

UPDATE: May 15, 2020: This article has been updated to include information from a Moody’s Investors Service report.

From the Mayo Clinic to Kaiser Permanente, nonprofit hospitals are posting massive losses as the coronavirus pandemic upends their traditional way of doing business.

Fitch Ratings analysts predict a grimmer second quarter: “the worst on record for most,” Kevin Holloran, senior director for Fitch, said during a Tuesday webinar.​

Over the past month, Fitch has revised its nonprofit hospital sector outlook from stable to negative. It has yet to change its ratings outlook to negative, though the possibility wasn’t ruled out.

Some have already seen the effects. Mayo estimates up to $3 billion in revenue losses from the onset of the pandemic until late April — given the system is operating “well below” normal capacity. It also announced employee furloughs and pay cuts, as several other hospitals have done.

Data released Tuesday from health cost nonprofit FAIR Health show how steep declines have been for larger hospitals in particular. The report looked at process claims for private insurance plans submitted by more than 60 payers for both nonprofit and for-profit hospitals.

Facilities with more than 250 beds saw average per-facility revenues based on estimated in-network amounts decline from $4.5 million in the first quarter of 2019 to $4.2 million in the first quarter of 2020. The gap was less pronounced in hospitals with 101 to 250 beds and not evident at all in those with 100 beds or fewer.

Funding from federal relief packages has helped offset losses at those larger hospitals to some degree.

Analysts from the ratings agency said those grants could help fill in around 30% to 50% of lost revenues, but won’t solve the issue on their own.

They also warned another surge of COVID-19 cases could happen as hospitals attempt to recover from the steep losses they felt during the first half of the year.

Anthony Fauci, the nation’s top infectious disease expert, warned lawmakers this week that the U.S. doesn’t have the necessary testing and surveillance infrastructure in place to prep for a fall resurgence of the coronavirus, a second wave that’s “entirely conceivable and possible.”

“If some areas, cities, states or what have you, jump over these various checkpoints and prematurely open up … we will start to see little spikes that may turn into outbreaks,” he told a Senate panel.

That could again overwhelm the healthcare system and financially devastate some on the way to recovery.

“Another extended time period without elective procedures would be very difficult for the sector to absorb,” Holloran said, suggesting if another wave occurs, such procedures should be evaluated on a case-by-case basis, not a state-by-state basis.

Hospitals in certain states and markets are better positioned to return to somewhat normal volumes later this year, analysts said, such as those with high growth and other wealth or income indicators. College towns and state capitols will fare best, they said.

Early reports of patients rescheduling postponed elective procedures provide some hope for returning to normal volumes.

“Initial expectations in reopened states have been a bit more positive than expected due to pent up demand,” Holloran said. But he cautioned there’s still a “real, honest fear about returning to a hospital.”

Moody’s Investors Service said this week nonprofit hospitals should expect the see the financial effects of the pandemic into next year and assistance from the federal government is unlikely to fully compensate them.

How quickly facilities are able to ramp up elective procedures will depend on geography, access to rapid testing, supply chains and patient fears about returning to a hospital, among other factors, the ratings agency said.

“There is considerable uncertainty regarding the willingness of patients — especially older patients and those considered high risk — to return to the health system for elective services,” according to the report. “Testing could also play an important role in establishing trust that it is safe to seek medical care, especially for nonemergency and elective services, before a vaccine is widely available.”

Hospitals have avoided major cash flow difficulties thanks to financial aid from the federal government, but will begin to face those issues as they repay Medicare advances. And the overall U.S. economy will be a key factor for hospitals as well, as job losses weaken the payer mix and drive down patient volumes and increase bad debt, Moody’s said.

Like other businesses, hospitals will have to adapt new safety protocols that will further strain resources and slow productivity, according to the report.​

Another trend brought by the pandemic is a drop in ER volumes. Patients are still going to emergency rooms, FAIR Health data show, but most often for respiratory illnesses. Admissions for pelvic pain and head injuries, among others declined in March.

“Hospitals may also be losing revenue from a widespread decrease in the number of patients visiting emergency rooms for non-COVID-19 care,” according to the report. “Many patients who would have otherwise gone to the ER have stayed away, presumably out of fear of catching COVID-19.”

 

Hospitals to face bumpy recovery with depressed margins into 2021, S&P predicts

Posted on by • Posted in Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Financially Distressed, Health System, Home Health, Hospital, Hospital Industry, Laboratory Industry, Market Outlook, Market Uncertainty, Medicare Advance Payments, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Paycheck Protection Program, The CARES Act • Leave a comment

https://www.healthcaredive.com/news/SP-ratings-hospital-margins-historic-lows-until-2021/578815/

April was the worst month ever for hospital operating margins

Dive Brief:

  • Despite rebounding patient volumes at some health systems, an overall slow and bumpy recovery period is most likely to last into next year, according to analysts with S&P Global Ratings. Operating margins will remain below historic levels for the rest of 2020 and into early 2021.
  • The ratings agency took negative action against companies in health sub-sectors facing more sudden and dramatic declines in business and now face less certain paths to recovery than others, such as dental companies, along with physical therapy and ambulatory surgery centers.
  • Medical staffing and physician groups were also downgraded or had their outlooks revised, due to major declines in emergency room and doctors office visits​ coupled with declining demand for anesthesia and radiology services related to delayed surgeries.

Dive Insight:

Federal relief grants are helping offset major financial losses for some health systems in the short-term, but factors like a second surge causing another total lockdown, rising unemployment and hesitancy from patients as they return to medical settings make long-term prospects unpredictable.

S&P Global Ratings said in a report this week that it took 36 negative actions in health services companies during the pandemic. The most affected sub-sector was dental companies. It also changed outlooks on ambulatory surgery centers given significant volume declines.

Hospitals and home healthcare were rated at moderate to high financial risk, though analysts expect those businesses to recover faster due to the more essential nature of their services, according to the report. And in the short-term, government relief funds will help bolster hospitals’ liquidity as they attempt to return to normal operations and recover from steep losses.

Delayed elective care that’s just restarting in some states led most hospitals to the financial fallout. But even hospitals treating a large number of COVID-19 patients will be hurt, as these patients are expensive to treat due to higher supply and labor costs, the report said.

It also found that nonprofit and for-profit operators could fare differently in their financial recoveries. Non-profit hospitals generally have larger cash reserves than for profit systems, which rely instead almost exclusively on cash flow and borrowings for liquidity.

Providers are relying specifically on the Coronavirus Aid, Relief and Economic Security Act which allocated $100 billion for providers that they don’t have to pay back, though there has been some criticism about how the money was distributed and whether it advantages some providers over others.

A Kaiser Family Foundation report found that CARES funding tends to favor for profit, higher margin hospitals with a higher mix of private payer revenue compared to those that rely on government payers such as Medicare and Medicaid.

Other legislation to help financially struggling health systems include advanced Medicare payments in the form of loans that must be paid back roughly four months after they are received.

The Paycheck Protection and Healthcare Enhancement Act passed in late April gave providers an additional $75 billion, though calculation and distribution methods have yet to be determined.

The U.S. House of Representatives also passed a $3 trillion bill dubbed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act that allocates $100 billion for provider reimbursement and creates special enrollment periods for Medicare and Affordable Care Act plans, though the Trump administration said it’s too soon for additional relief funding.

Lab companies were put in the moderate risk category, and seeing a “40% decline in lab tests net of COVID testing,” S&P said.

Still, it said despite the drop in overall testing for LabCorp and Quest Diagnostics, S&P predicted “their services to become even more important, and for their services to recover reasonably well as testing related to the pandemic continues to grow and as medical procedures and physician visits ramp-up through the rest of the year and into 2021.”

 

 

 

COVID-19 pushes Mayo Clinic’s operating income into free fall

Posted on by • Posted in Cash, Cash Reserves, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employee Protections, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Outlook, Market Power, Market Share, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic • Leave a comment

https://www.healthcaredive.com/news/covid-19-pushes-mayo-clinics-operating-income-into-free-fall/578191/

Farrugia calls 2019 'a year of remarkable growth' as Mayo reports ...

Dive Brief:

  • Prior to the onset of the novel coronavirus, Mayo Clinic was cruising along with a healthy operating margin of 6.7% during the first two months of the quarter. But by the close of the period, the operating margin was squeezed to just 0.9% while net operating income fell off a cliff, free falling 88% to $29 million compared to the first quarter of 2019.
  • Due to contracting services and the near closure of its outpatient business in response to the pandemic, revenues for the quarter declined nearly 4% while expenses rose 3% compared to the prior-year period.
  • The fluctuation in the financial markets caused a downturn in Mayo’s investment portfolio, leading to an overall net loss of $623 million for the Rochester, Minnesota-based nonprofit health system.

Dive Insight:

Mayo Clinic is the latest hospital operator to report it first quarter results have been battered by the pandemic.

The system, which took in more than $1 billion in operating income in 2019, joins other major hospital operators that reported a dip in volumes amid the public health crisis, including HCA and CommonSpirit.

The second quarter is not likely to look better, according to Fitch Ratings. The second quarter looks bleak as the ratings agency issued an ominous report predicting it would be the “worst on record” for most nonprofit hospitals.

Yet, some of the for-profit hospital operators see May as the beginning of the recovery. Both Tenet and CHS executives seemed upbeat about the prospects for this month, noting it was the start of resuming elective procedures that had been put off.

Despite the hospital sector as a whole taking a major hit from the pandemic, big wealthy systems like Mayo have significant rainy day funds. Mayo reported cash and investments of more than $10.6 billion as of March 30 with 252 days cash on hand.

In April, Mayo issued a voluntary notice about how the virus was taking on its business, noting reduced salaries for executives and physicians, furloughs and a hiring freeze, among other efforts.​

In its first quarter report, Mayo detailed the ways in which it’s tackling the novel coronavirus on the medical front, including leading a program, approved by the FDA, that gives severely sick COVID-19 patients plasma from those who were previously sickened but have since recovered from the virus.

Mayo said it’s preparing the program’s first safety report on the first 5,000 patients to receive the infusion. As of May 12, more than 9,300 patients have been infused, Mayo said.

The system also runs COVID-19 testing, and said it is now able to administer 8,500 molecular tests and 20,000 serologic tests, which look for antibodies to the virus in those that may have been previously infected, daily.

 

 

CommonSpirit posts $1.4B loss, says full COVID-19 impact unknown

Posted on by • Posted in Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employee Protections, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Power, Market Share, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Pandemic, Paycheck Protection Program, The CARES Act, Uncertainty • Leave a comment

https://www.healthcaredive.com/news/commonspirit-posts-14b-loss-too-soon-to-project-long-term-covid-19-impac/578100/

Locations | CommonSpirit Health

Dive Brief:

  • CommonSpirit Health, sprung from last year’s merger of California-based Dignity Health and Colorado-based Catholic Health Initiatives, reported a loss topping $1.4 billion in the fiscal third quarter ending March 31, although adjusted revenues were flat compared to the third quarter of 2019. The biggest proportion of losses were tied to investments, as its portfolio dropped in value by nearly $1.1 billion. Its total net assets are down nearly $2.5 billion from a year ago.
  • Like many other hospital systems, CommonSpirit reported a drop in patient volumes that began in mid-March as states began issuing lockdown orders. Acute admissions dropped more than 5% for the quarter compared to a year ago.
  • CommonSpirit did receive more than $700 million in Coronavirus Aid, Relief, and Economic Security Act funds, although since it was received on March 31 it will be booked into its fiscal fourth quarter financial statements. The system received another $2.6 billion in accelerated payments from CMS and anticipates receiving another $410 million in disaster relief funding and from the Paycheck Protection Program.​

Dive Insight:

The COVID-19 pandemic is continuing to ravage the bottom lines of providers, and the nation’s largest not-for-profit hospital system, CommonSpirit Health, is no exception.

Its first full year as a unified system is 2020, and the COVID-19 pandemic is challenging the 134-hospital organization in ways it likely never anticipated. Admissions are down for the foreseeable future, coupled with the need to spend tens of millions of dollars on personal protective equipment, respirators and to divert a significant amount of resources toward treating coronavirus patients.

Fitch Ratings said COVID-19 is to blame for the worst second quarter for most U.S. hospitals and systems.

For the third quarter of 2020, CommonSpirit reported an operating loss of $145 million, compared to a pro forma $124 million loss reported by Dignity and CHI for the first quarter of 2019.

CommonSpirit posted a net loss of $1.4 billion for the third quarter, compared to a pro forma net gain of $9.7 billion for the third quarter of 2019. However, $9.2 billion of that came from what CommonSpirit termed a “contribution from business combination,” the net assets received from both parties by merging with one another. For the first nine months of fiscal 2020, CommonSpirit lost $1.1 billion on revenue of $22.4 billion, compared to a net gain of $9.5 billion on revenue of $21.6 billion over the same period in fiscal 2019.

And despite receiving some $3.7 billion in federal assistance, CommonSpirit said in its quarterly financial disclosures that it remains too soon to tell what the impact of COVID-19 will be on the organization over the long-term.

Prior to the pandemic, CommonSpirit’s financial position was trending stronger compared to its pre-merger state. Seven of its 14 operating divisions reported a jump in revenue during the quarter compared to 2019.

 

 

 

 

Fitch Q2 outlook for nonprofit hospitals: ‘worst on record’

Posted on by • Posted in 2020 Election Issues, Cash, Cash Reserves, Cash-Flow Improvements, Clinical Testing, Contact Tracing, Coronavirus, Credit Quality, Credit Ratings, Crisis, Crisis Management, Demand, Economic Crisis, Economic Stimulus, Elective Procedures, Elective Surgery, Employee Furlough, Employee Hiring Freeze, Employee Layoffs, Employee Pay Cuts, Employer-Based Health Insurance, Essential Workers, Financially Distressed, Health Insurance Coverage Adequacy, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Premiums, High Prices, Hospital, Hospital Industry, Infection Control Plan, Infectious Virus, Market Outlook, Mortality, National Strategy, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Out of Pocket Expenses, Pandemic, Preexisting Conditions, Public Health, Public Safety, Quarantine, Social Distancing, Surprise Bills, Uncertainty, Underinsured, Unemployment, Unemployment Insurance, Uninsured • Leave a comment

https://www.healthcaredive.com/news/fitch-analysts-hospital-worries-FY-2020/577875/

Nicklaus Children's Health System Receives A+ Rating from Fitch ...

From the Mayo Clinic to Kaiser Permanente, nonprofit hospitals are posting massive losses as the coronavirus pandemic upends their traditional way of doing business.

Fitch Ratings analysts predict a grimmer second quarter: “the worst on record for most,” Kevin Holloran, senior director for Fitch, said during a Tuesday webinar.​

Over the past month, Fitch has revised its nonprofit hospital sector outlook from stable to negative. It has yet to change its ratings outlook to negative, though the possibility wasn’t ruled out.

Some have already seen the effects. Mayo estimates up to $3 billion in revenue losses from the onset of the pandemic until late April — given the system is operating “well below” normal capacity. It also announced employee furloughs and pay cuts, as several other hospitals have done.

Data released Tuesday from health cost nonprofit FAIR Health show how steep declines have been for larger hospitals in particular. The report looked at process claims for private insurance plans submitted by more than 60 payers for both nonprofit and for-profit hospitals.

Facilities with more than 250 beds saw average per-facility revenues based on estimated in-network amounts decline from $4.5 million in the first quarter of 2019 to $4.2 million in the first quarter of 2020. The gap was less pronounced in hospitals with 101 to 250 beds and not evident at all in those with 100 beds or fewer.

Funding from federal relief packages has helped offset losses at those larger hospitals to some degree.

Analysts from the ratings agency said those grants could help fill in around 30% to 50% of lost revenues, but won’t solve the issue on their own.

They also warned another surge of COVID-19 cases could happen as hospitals attempt to recover from the steep losses they felt during the first half of the year.

Anthony Fauci, the nation’s top infectious disease expert, warned lawmakers this week that the U.S. doesn’t have the necessary testing and surveillance infrastructure in place to prep for a fall resurgence of the coronavirus, a second wave that’s “entirely conceivable and possible.”

“If some areas, cities, states or what have you, jump over these various checkpoints and prematurely open up … we will start to see little spikes that may turn into outbreaks,” he told a Senate panel.

That could again overwhelm the healthcare system and financially devastate some on the way to recovery.

“Another extended time period without elective procedures would be very difficult for the sector to absorb,” Holloran said, suggesting if another wave occurs, such procedures should be evaluated on a case-by-case basis, not a state-by-state basis.

Hospitals in certain states and markets are better positioned to return to somewhat normal volumes later this year, analysts said, such as those with high growth and other wealth or income indicators. College towns and state capitols will fare best, they said.

Early reports of patients rescheduling postponed elective procedures provide some hope for returning to normal volumes.

“Initial expectations in reopened states have been a bit more positive than expected due to pent up demand,” Holloran said. But he cautioned there’s still a “real, honest fear about returning to a hospital.”

Moody’s Investors Service said this week nonprofit hospitals should expect the see the financial effects of the pandemic into next year and assistance from the federal government is unlikely to fully compensate them.

How quickly facilities are able to ramp up elective procedures will depend on geography, access to rapid testing, supply chains and patient fears about returning to a hospital, among other factors, the ratings agency said.

“There is considerable uncertainty regarding the willingness of patients — especially older patients and those considered high risk — to return to the health system for elective services,” according to the report. “Testing could also play an important role in establishing trust that it is safe to seek medical care, especially for nonemergency and elective services, before a vaccine is widely available.”

Hospitals have avoided major cash flow difficulties thanks to financial aid from the federal government, but will begin to face those issues as they repay Medicare advances. And the overall U.S. economy will be a key factor for hospitals as well, as job losses weaken the payer mix and drive down patient volumes and increase bad debt, Moody’s said.

Like other businesses, hospitals will have to adapt new safety protocols that will further strain resources and slow productivity, according to the report.​

Another trend brought by the pandemic is a drop in ER volumes. Patients are still going to emergency rooms, FAIR Health data show, but most often for respiratory illnesses. Admissions for pelvic pain and head injuries, among others declined in March.

“Hospitals may also be losing revenue from a widespread decrease in the number of patients visiting emergency rooms for non-COVID-19 care,” according to the report. “Many patients who would have otherwise gone to the ER have stayed away, presumably out of fear of catching COVID-19.”

 

 

 

Cartoon – Today’s Board Agenda

Posted on by • Posted in 2020 Election Issues, Agenda, Bankruptcy, Board, Cartoon, Cash, Cash Reserves, Chapter 11, Credit Quality, Credit Ratings, Creditors, Crisis, Crisis Management, Economic Crisis, Economy, Financially Distressed, Leadership, Today • Leave a comment

If there's no more old business and no more new business, let's ...

Quantifying the massive blow to hospital volumes

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Even after hearing dozens of reports from health systems about how steep their COVID-related volume losses have been, we were still floored by this analysis from healthcare analytics firm Strata Decision Technology, documenting a 55 percent drop in patients seeking hospital care across the country.

The report, which analyzed data from 228 hospitals in 51 health systems across 40 states, found that no clinical service line was immune from steep volume losses. The graphic below shows volume loss by service line in March-April 2020 compared to the same period in 2019.

Unsurprisingly, ophthalmology, gynecology, ortho/spine and ENT—all specialties with a high portion of elective cases, and heavily dependent on procedures—saw volume declines of greater than 70 percent. But even obstetrics and neonatology (which we expected to be “pandemic proof”) and infectious disease (which we thought might be busier in the throes of COVID-19) saw losses of 20-30 percent.

Looking at specific procedures, complex elective surgeries like spinal fusion and hip and knee replacements were almost completely obliterated. Precipitous declines in encounters for chronic diseases like coronary heart disease and diabetes (down 75 and 67 percent, respectively) and cancer screenings (a 55 percent decline in breast health and a 37 percent decline in cancer care overall) point to the likelihood of worrisome disease exacerbations, and a future full of more complex patients.

The volume losses, plus a 114 percent rise in uninsured patients, led to average two-week losses of $26.5M per health system across the study’s cohort. Strata will continue to track and publish volume changes, but this early snapshot paints a bleak picture of staggering financial hits, and “lost” patient care that will carry lasting ramifications for the health of communities nationwide.