The bill is coming due for federal loans given to hospitals early in the COVID-19 pandemic, adding to their financial woes, Oregon Public Broadcastingreported May 28.
The Medicare Accelerated and Advance Payment program offered hospitals short-term interest- free loans, according to the report. These loans are coming due as hospitals’ costs are rising quickly and revenue from patient stays and surgeries is growing more slowly.
The idea behind the program was that hospitals would be able to pay back the advance once the pandemic passed and operations returned to normal, according to the report. Hospitals are still dealing with the effects of the pandemic, but the federal government wants to recoup the money to keep Medicare funded.
In March 2021, HHS began recovering those cash advances by paying hospitals 25 percent less for Medicare reimbursement claims, according to the report. Earlier this year, HHS began paying hospitals 50 percent less for reimbursement claims.
Hospitals lobbied for the loans to be forgiven, but were unsuccessful, according to the report.
On Thursday, President Biden signed the American Rescue Plan (ARP) Act of 2021 into law, committing nearly$1.9T of federal spending to boost the nation’s recovery from the coronavirus pandemic. In addition to direct payments to American families, extension of unemployment benefits, several anti-poverty measures, and aid to state and local governments, the plan also contains several key healthcare measures.
Approved by Congress on a near party-line vote using the budget reconciliation process, the law includes thebroadest expansion of the 2010 Affordable Care Act (ACA) to date. It extends subsidies for upper-middle income individuals to purchase coverage on the Obamacare exchanges, caps premiumsfor those higher earners at a substantially lower level, and boosts subsidies for those at the lower end of the income scale.
The Congressional Budget Office (CBO) estimates that expanded ACA subsidies in the ARPwill result in 2.5M more Americans gaining coverage in the next two years. Fully subsidized COBRA coverage for workers who lost their jobs due to COVID is also extended through the end of September, which the CBO estimates will benefit an additional 2M unemployed Americans.
The ARP also puts in place new support for Medicaid, enhancing coverage for home-based care, maternity services, and COVID testing and vaccination, and providing new incentives for the 12 states which haven’t yet expanded Medicaid eligibility under the ACA to do so. In addition to the ACA’s 90 percent match for those states’ Medicaid expansion populations, the lucky dozen will also receive a 5 percent bump to federal matching for the rest of their Medicaid populations should they choose to expand.
Three policy changes of keen interest to providers were left out of the final version of the bill. First, while a special relief fund of $8.5B was created for rural providers, there was no additional allocation of relief funds for hospitals and other providers, similar to the $178B allocated by the CARES Act, despite initial proposals of up to $35B in additional funding. (Around $25B of the initial round of provider relief is still unspent.) Second, the ARPdid not extend or alter the repayment schedule for advance payments to providers made last year, in spite of industry pressure to implement more favorable repayment conditions. Finally, the new law does not extend last year’s pause on sequester-related cuts to Medicare reimbursement, although the House is expected to consider a separate measure to address that issue next week.
Notably, the coverage-related provisions of the ARP are only temporary, lasting through September of next year. That sets up the 2022 midterm elections as yet another campaign cycle dominated by promises to uphold and protect the Affordable Care Act—by then a 12-year-old law bolstered by this week’s COVID recovery legislation.
The undercurrent of the VP debate is the age and health of the two men vying for the presidency.
The two remaining presidential debates, scheduled for October 15 and 22, are in question due to President Trump’s positive COVID-19 and quarantine status, making the vice presidential debate this Wednesday at 9 p.m. even more important than VP debates of past elections.
The undercurrent in the debate consists of the ages of challenger Biden, who is 77 and turning 78 before the end of the year, and Trump, 74, who has been hospitalized for COVID-19 and was released from Walter Reed Army Medical Center on Monday afternoon. Trump has said he plans to debate Biden on October 15.
This VP debate is big, said Paul Keckley, a healthcare policy analyst and managing editor of the Keckley Report.
“The reason is not so much the two are debating,” Keckley said. “We have a 77- year-old challenger and a 74-year-old incumbent. Voters are expecting the odds are one will become disabled and the vice president is going to step in. That’s the undercurrent of this debate.”
Healthcare is an obvious dominant theme Wednesday night beyond the health of the two men seeking the presidency.
It is expected that Biden’s running mate, Kamala Harris will challenge Vice President Mike Pence on his role heading the coronavirus task force when close to 7.5 million people in this country have been infected with COVID-19 and more than 200,000 have died.
Pence will likely challenge Harris on her support for Medicare for All before she backtracked to support Biden’s public-private option for healthcare coverage.
Pence and Harris are expected to lay out the healthcare plans of their respective Republican and Democratic nominees less than four weeks before the election, in a way the lead candidates failed to get across during the first presidential debate that presented more chaos than clarity.
TRUMP AND BIDEN PLANS
Trump and Biden differ fundamentally on whether the federal government should be involved in the business of providing healthcare coverage.
Trump’s guiding principles rest on the pillar of state autonomy as opposed to a federalized healthcare system and Biden’s maxim that healthcare is a right, not a privilege.
Trump believes that private solutions are better than government solutions, according to Keckley. He is much less restrained on private equity and the Federal Trade Commission’s scrutiny of vertical integration. States become the gateway to the market as private solutions are sold to states as innovation.
Trump’s other concept is that the door to engaging consumers in healthcare is price transparency. His view is that price transparency will spawn consumer engagement.
Centers for Medicare and Medicaid Services Administrator Seema Verma, who was appointed by Trump in 2016 based largely on the recommendation of Pence, is instituting a rule, starting January 1, 2021, requiring hospitals to have price transparency for 300 shoppable services. Hospitals are being required to make their contract terms with payer accessible.
This is separate from CMS’s interoperability rule aimed at payers that also goes into effect on January 1.
Trump believes healthcare is a personal responsibility, not a public obligation. To Trump, healthcare is a marketplace where there are winners and losers, according to Keckley.
Biden has a more developed policy platform on making healthcare a universal right, starting with strengthening the Affordable Care Act that was passed while Biden was vice president during President Barack Obama’s terms.
Biden wants to increase the eligibility for tax subsidies in the ACA up to 400% of the federal poverty level, which would expand access to subsidized health insurance.
He also wants to reduce the affordability threshold for employer insurance. Currently, if employees pay more than 9.7% of their adjusted income for their workplace coverage, they can seek a plan in the ACA marketplace. Biden would lower that eligibility for ACA coverage to 8.5%, opening the door for many more consumers to be insured through the ACA, at a lower cost.
Biden would also lower the age of eligibility for Medicare from 65 to 60.
For companies such as manufacturing and transportation, in which individuals can retire after 30 years of service, this lets them into the Medicare system earlier to fill that gap between retirement and Medicare eligibility.
Biden’s public option would create insurance plans that would compete with private plans.
The other factor to watch on the Biden side, Keckley said, is his clear focus on equity and diversity in healthcare.
AFFORDABLE CARE ACT
Biden wants to strengthen Obamacare while Trump is actively pursuing a repeal of the law through the Supreme Court.
President Trump’s debate prep and the White House Rose Garden event announcing the nomination of Judge Amy Coney Barrett to replace the late Supreme Court Justice Ruth Bader Ginsburg, border on the definition of super spreader events.
The Justices, perhaps with the addition of Trump’s pick, Amy Coney Barrett, if there are enough Republican senators well enough and in attendance to vote for confirmation, are scheduled to hear oral arguments in the case brought by 18 GOP-led states on November 10, the week after the election.
Senators must be present to vote, and Republicans, who have a majority of 53 to 47 seats, need a four-vote majority. Two Republican senators – Susan Collins of Maine and Lisa Murkowski of Alaska – have said they wouldn’t vote on a nominee prior to the election. Vice President Mike Pence could cast the deciding vote in a tie.
Three Republican senators have tested positive for the coronavirus. Sens. Mike Lee of Utah and Thom Tillis of North Carolina, who sit on the Judiciary Committee, tested positive for COVID-19 days after attending the White House Rose Garden event on September 26. Republican Sen. Ron Johnson of Wisconsin is now the third to test positive, though he did not attend that event.
There was a lack of social distancing and mask wearing at both the Rose Garden nomination and at a meeting between Trump and staff for debate prep. Twelve people in Trump’s inner circle, including his wife Melania, former New Jersey governor Chris Christie and White House Press Secretary Kayleigh McEnany, have tested positive since attending.
Senate Majority Leader Mitch McConnell wrote in an email to GOP senators obtained by CNN that he needs all Republican senators back in Washington by October 19.
Trump announced in a tweet Monday that he would be leaving Walter Reed later in the afternoon, saying he felt “really good!” and adding, “Don’t be afraid of Covid. Don’t let it dominate your life. We have developed, under the Trump Administration, some really great drugs & knowledge. I feel better than I did 20 years ago!”
Trump has been criticized for leaving the hospital on Monday to take a drive-by ride to wave to supporters. Attending physician Dr. James Phillips called the action “insanity” and “political theater” that put the lives of Secret Service agents in the car with him at risk.
Trump has downplayed the virus in an effort to reopen the country and the economy, and has put the blame on China, where the coronavirus originated.
Trump told Biden during the debate, “We got the gowns; we got the masks; we made the ventilators. You wouldn’t have made ventilators – and now we’re weeks away from a vaccine.”
Biden puts the blame squarely on Trump for delaying action to stop the spread.
Biden said during the debate: “Look, 200,000 dead. You said over seven million infected in the United States. We in fact have 5% or 4% of the world’s population – 20% of the deaths. Forty thousand people a day are contracting COVID. In addition to that, about between 750 and 1,000 people, they’re dying. When [Trump] was presented with that number he said ‘It is what it is’ – what it is what it is – because you are who you are. That’s why it is. The president has no plan. He hasn’t laid out anything.”
Biden said that back in July he laid out a plan for providing protective gear and providing money the House passed to get people the help they need to keep their businesses open and open schools.
Under Trump’s Administration, Congress passed $175 billion in provider relief funds for hospitals, small businesses, individuals and others – $100 billion from the CARES Act and $75 billion from the Paycheck Protection Program and Healthcare Enhancement Act.
CMS Administrator Seema Verma was healthcare advisor to Pence while he was governor of Indiana. Her consulting firm, SVC, Inc., worked closely with Pence to design Indiana’s Medicaid expansion under the Affordable Care Act. They developed a unique Medicaid expansion program called Health Indiana Plan 2.0, which mandated low income adults above the poverty level pay monthly premiums for their healthcare.
Members who did not pay faced being disenrolled for six months.
As administrator, Verma has initiated similar work requirements for Medicaid coverage nationwide.
While as governor Pence implemented Medicaid expansion, as vice president he has supported torpedoing the ACA, and has pushed the Graham-Cassidy plan for healthcare reform that would have replaced the ACA.
Neither Trump nor Biden has taken on the pharmaceutical industry in a meaningful way, though both have voiced a strong belief that drug manufacturers are egregious to the system, according to Keckley.
“Both camps are saying, we’re really going to take them on,” he said.
During the debate, Trump said he was cutting drug prices by allowing American consumers to buy drugs from Canada and other countries under a favored nation status.
“Drug prices will be coming down, 80 or 90 percent,” Trump said during the debate, telling Biden he hadn’t done anything similar during his 47 years in government.
If Trump gets a second term, there will likely be more industry folks in his circle, following up on his first term of stacking his cabinet with business people.
Biden would be more likely to lean toward a blend of public health officials and industry executives. There would be more of a spotlight on wealth creation in healthcare and executive pay.
In the $1.1 trillion world of prescription drugs, the United States makes up 40% of the market.
“We’re the hub of the prescription drug industry,” Keckley said.
Hospital system CommonSpirit Health reported operating revenue losses of $550 million during its fiscal year that ended in June, as the COVID-19 pandemic continues to roil patient volumes.
The 137-hospital system reported its financial earnings Friday for the 2020 fiscal year that ended June 30. CommonSpirit’s expenses also surged during the pandemic as more resources were needed to screen visitors and staff.
“Although it varies significantly by division, beginning the middle of March, the COVID-19 pandemic caused up to a 40% slowdown in volumes,” CommonSpirit’s financial report said. “As communities heeded guidelines to avoid hospitals for non-emergent issues, appointment volume, especially for specialty practices, fell and emergency department volume declined.”
CommonSpirit’s patient volumes did rebound after shelter-in-place orders started to be lifted in April and May, but the volumes are still below pre-pandemic levels.
At the end of the system’s fiscal year on June 30, the volumes on adjusted admissions were down 6.2% compared with the 2019 fiscal year.
Adjusted patient days for the fiscal year were also lower than the same period in 2019 by 5.7%.
At the same time, net patient and premium revenues declined by $239 million, or 0.9% over the same period in 2019.
“The decrease is primarily due to the impact of the COVID-19 pandemic and increased charity care, partially offset by a stable payor mix,” the earnings said.
Overall, CommonSpirit recorded an operating loss of $550 million for the 2020 fiscal year, which was an improvement on the $617 million in losses from 2019.
But those 2020 losses ballooned up to $1.4 billion when not taking into account money the system received from a $175 billion provider relief fund Congress set up as part of the CARES Act to help prop up hospitals and other providers.
The system also reported a $1.3 billion decline in earnings before interest, tax, depreciation and amortization and nonoperating income from March through June.
About 62% of the lost EBITDA has been recouped through the CARES Act funding, and another $500 million remains to be regained, CommonSpirit said.
Overall, CommonSpirit has recorded $826 million in money from the provider relief fund. It also got another $2.6 billion from the Medicare Accelerated and Advance Payment Program, which the system will have to repay.
The system anticipates it will defer $410 million in employer payroll taxes to December 2022, a flexibility also afforded under the CARES Act.
“While the aid received from the programs above provides much needed assistance during this crisis, CommonSpirit is unable to assess the extent to which the amounts and benefits received, or to be received, will offset the long-term changes in volumes, payor mix or service mix,” the report said.
The Department of Health and Human Services has more than $50 billion to still give out to hospitals, but some hospital groups say that more money is needed to combat the financial crisis caused by the pandemic. Talks on a new coronavirus relief deal have stalled in Congress.
While some larger for-profit systems such as HCA and Tenet have posted profits thanks to the provider relief funding, other not-for-profit systems such as Trinity Health and some smaller systems have reported struggles with overcoming the new financial crisis.
A stop-gap funding bill the president signed into law Thursday will keep the government open until mid-December and includes some provisions that could help providers’ bottom lines. The bill includes relief on advanced and accelerated Medicare loans and a delay of Medicaid payment cuts for disproportionate share hospitals.
The legislation extending government funding at current levels was passed by the House earlier this month and approved by the Senate on Wednesday. But more sweeping aid many providers wanted, including more grants for hospitals and a higher federal match rate for Medicaid, were left out of the legislation.
Provider groups like the American Hospital Association thanked Congress and the Trump administration for the relief, but AHA noted it would continue lobbying for Medicare loan forgiveness and an extended deadline for the Medicaid DSH cuts.
The continuing resolution, and its healthcare provisions within, are pretty much the only direct aid providers can expect from Washington before the looming November presidential election. Congress has largely punted on a fifth round of COVID-19 relief legislation amid partisan deadlock, with Republicans backing a much skinnier package than Democrats.
The CR delays the repayment date for $100 billion in advanced Medicare loans to providers by a year. CMS originally planned to start recouping the loans from providers’ fee-for-service Medicare payments in late July, but unilaterally decided to hold off as lawmakers negotiated the bill.
It also lowers the rate of recoupment to 25% for the first 11 months of repayment, down from the current 100% rate, and 50% for the next six months. Providers have 29 months to pay back the funds in full before interest kicks in, and the interest rate is decreased from 9.6% to 4%.
The original repayment terms and timeline would have been difficult for some cash-strapped doctor’s offices and hospitals to meet, as the burden imposed by COVID-19 hasn’t lifted and is worsening in many areas of the country. Many providers took out the loans earlier this year as a lifeline to stave off insolvency — still a very real threat for many practices.
About 35% of primary care physicians say revenue and income are still significantly lower than pre-pandemic levels, losses that could force them to close, according to a September survey by the Larry A. Green Center and the Primary Care Collaborative.
AHA CEO Rick Pollack said in a Wednesday statement the massive hospital association appreciated the provisions, but would keep pushing for full loan forgiveness, along with extending the delay of DSH cuts for all of the 2021 fiscal year. The CR pushed back the original payment cut start date from Dec. 1 to Dec. 12.
The Association of American Medical Colleges was more worried about the impact on the system.
“We are concerned that health care providers, researchers, students, and public health professionals — who have been our country’s first line of defense against COVID-19 — will remain in limbo despite ongoing challenges that the pandemic presents,” CEO David Skorton said in a statement. “We strongly believe that a larger COVID-19 legislative relief package is essential to our nation’s health.”
However, drastic estimates from providers on financial losses largely haven’t panned out, though public health experts do warn COVID-19 could worsen going into the winter months. AHA estimated U.S. hospitals would see operating profits fall by almost $51 billion in April, the month with the sharpest volume decline because of the pandemic. It’s likelier hospitals lost about half that, according to research from a congressional advisory board, with federal grants covering the worst of short-term losses.
The CR also includes a provision stopping Medicare beneficiaries from seeing a monthly $50 Part B premium hike next year. It will keep the government open until Dec. 11, setting up another funding fight to avoid a shutdown after the election.
The House passed a short-term government funding bill that extends the deadline for providers to start repaying Medicare advance payment loans to the end of the COVID-19 public health emergency.
The bill that the House passed late Tuesday is a major win for provider groups who worried they could struggle to repay the Medicare loans starting in August. The bill still has to pass through the GOP-controlled Senate.
The continuing resolution, which funds the federal government through Dec. 11, also lowers the interest rate for payments made under the Medicare Accelerated and Advance Payment Program to 4%, down from 10.25%.
The Centers for Medicare & Medicaid Services (CMS) gave out more than $100 billion in advance payments in March to providers slammed by the pandemic. The payments are essentially loans which CMS recoups by garnishing Medicare payments to providers. That process starts 120 days after the first payment was received.
But the bill would give providers one year before Medicare can claim their payments.
It would also give providers 29 months since the first payment to fully repay the loan amount. Currently, CMS gives providers a year to fully repay.
In addition to the changes to the repayment terms, the bill also delays $4 billion in payment cuts to disproportionate share hospitals that were supposed to go into effect as part of the Affordable Care Act. The cuts will now be delayed until December.
The bill earned plaudits from the hospital industry, which has pressed Congress for help as providers are still struggling with the pandemic and could not afford to have Medicare payments become garnished.
“Our hospitals continue to suffer high costs and revenue losses associated with COVID-19, and they welcome the relief this continuing resolution would provide,” said Bruce Siegel, president and CEO of America’s Essential Hospitals, which represents safety net hospitals.
The Federation of American Hospitals said earlier this week before the House vote that the advance payment program is a “vital lifeline to hospitals and healthcare providers during the pandemic that has enabled hospitals and providers to maintain access to critical patient care. But the ongoing pressures of the current crisis required a revision of the repayment terms.”
The bill, which has approval from the White House, now heads to the Senate. The chamber must reach a decision on the legislation to avoid a government shutdown when funding runs out on Sept. 30.
Cleveland Clinic ended the second quarter of this year with an operating loss, which the system attributed to financial damage tied to the COVID-19 pandemic.
The 18-hospital system’s revenue declined to $2.3 billion in the second quarter of this year, down from $2.7 billion in the same period a year earlier, according to unaudited financial documents. In the first six months of this year, the health system experienced net patient service revenue shortfalls of more than $830 million, compared to plan, and incurred more than $165 million in COVID-19 preparedness costs.
Cleveland Clinic reported operating expenses of $2.36 billion in the second quarter of this year, up from $2.34 billion in the same period last year.
The hospital system ended the most recent quarter with an operating loss of $201.8 million, compared to operating income of $116.2 million in the second quarter of 2019. Looking at the first six months of this year, Cleveland Clinic reported an operating loss of $241.7 million, compared to operating income of $152.4 million a year earlier.
To help offset financial damage tied to the pandemic in the first six months of this year, Cleveland Clinic recognized $324 million in federal grants made available under the Coronavirus Aid, Relief and Economic Security Act. The health system also applied for and received $849 million in Medicare advance payments, which must be repaid.
After factoring in investment gains of $477.5 million and other nonoperating items, Cleveland Clinic closed out the second quarter of this year with net income of $276.1 million. In the same period a year earlier, the health system posted net income of $256.4 million.
CMS accelerated payments to hospitals and other healthcare providers at the beginning of the COVID-19 pandemic to help temporarily relieve financial strain. It’s time to begin repaying the Medicare loans but that isn’t possible for some rural hospitals, according to NPR.
CMS expanded the Accelerated and Advance Payment Program in late March to help offset financial damage caused by the COVID-19 pandemic. CMS announced April 26 that it was reevaluating pending and new applications for advance payments due to the availability of funds under the Coronavirus Aid, Relief and Economic Security Act. As of May, CMS had paid out $100 billion in advance payments, the bulk of which went to hospitals.
Hospitals and other healthcare providers are required to start repaying the Medicare loans this month. Most hospitals will have one year from the date the first loan payment was made to repay the loans, according to Kaiser Family Foundation.
Ozarks Community Hospital, 25-bed critical access hospital in Gravette, Ark., is one of the hospitals that applied for and accepted the Medicare loans. The hospital also received grants made available under the CARES Act, which do not have to be repaid.
CEO Paul Taylor said Ozarks Community Hospital’s revenue is still constrained, and he doesn’t know how it will pay back its $8 million Medicare loan. Payments for new Medicare claims will be offset to repay the loans, but losing those payments could force the hospital to close, Mr. Taylor told NPR.
“If I get no relief and they take the money … we won’t still be open,” he said.
Ozarks Community Hospital is one of more than 850 critical access hospitals in rural areas that received Medicare loans, according to NPR. Given the shaky financial footing of many rural hospitals before the pandemic, the strain of having Medicare payments withheld could be enough to force others to shut down.
Before the pandemic, more than 600 rural hospitals across the U.S. were vulnerable to closure, according to an estimate from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators.
Hospital system earnings for the second quarter of the year painted a stark picture of how federal relief funding helped offset massive losses in patient volume sparked by the COVID-19 pandemic.
But a full financial recovery may not happen until next year, some analysts warn.
Major hospital systems such as HCA Health and Universal Health Services posted profits in the second quarter despite plummeting volumes sparked by the cancellation of elective procedures and patients avoiding care due to fears of exposure to the virus. A key boost, however, came from a $175 billion fund passed by Congress and loans under the Medicare Accelerated and Advance Payments Program.
“These companies survived the June quarter and exited the quarter with substantial amounts of liquidity,” said Jonathan Kanarek, vice president and senior credit officer for Moody’s Investors Services. “We think [liquidity] is probably the most critical factor for them as far as weathering the storm.”
Congress has approved $175 billion to help prop up providers, of which the Department of Health and Human Services has distributed more than $100 billion.
The Centers for Medicare & Medicaid Services also gave out $100 billion in advance Medicare payments before suspending the program in late April. But the payments are loans that hospitals have to start repaying as soon as this month, as opposed to the congressional funding that does not have to get paid back.
Hospital system earnings illustrated how pivotal the relief funds were to combat massive holes in patient volumes.
Tenet Healthcare, which operates 65 hospitals across the country, reported Monday that it earned in the second quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $732 million. But of that $732 million, more than 70% of it was aid from the relief fund.
Tenet wasn’t the only for-profit system where relief funding was a large part of their adjusted EBITDA.
Community Health Systems, which operates 95 facilities, reported an adjusted EBITDA of $454 million in the second quarter. But most of that figure was due to the $448 million that it got from the relief funds.
The provider funding made up a smaller portion of HCA Healthcare’s earnings. The system of 184 hospitals reported that the funding made up 31% of its adjusted EBITDA.
Hospital system volumes greatly declined in April as facilities were forced to cancel elective procedures and patients were scared of going to the hospital.
For example, Tenet’s hospital admissions in April were 33% of what it had in the same month in 2019. But volumes started to recover as shelter-in-place orders expired and some states got a better handle on the pandemic.
Tenet saw admissions grow in June to 90% of what they were in June 2019.
But it remains unclear what hospital finances will look like for the rest of the year. Major systems like Tenet and HCA have scrapped their 2020 financial outlook because of the pandemic.
“We don’t think the shape of this recovery or trajectory will be linear in nature,” Kanarek said. “We think there will be a lot of starts and stops.”
Those starts and stops will depend on the extent of the spread of the virus in an area.
Some states such as Florida, Texas and Arizona have seen massive spikes in the virus in recent weeks, which has put renewed strain on systems. Texas’ governor canceled elective procedures in eight counties back in June, some of which included major cities such as Houston and Dallas.
“I am a little skeptical that we are going to be back to normal before we ultimately have a vaccine,” Kanarek said.
It is also murky on whether hospitals will continue to get more financial help from Congress.
The House passed the HEROES Act more than a month ago that gives providers another $100 billion, but it has stalled in the Senate.
Congress and the White House have been in extensive talks for more than a week on a new relief package. Senate Majority Leader Mitch McConnell released a package last week that had $25 billion in relief funding and lawsuit liability protections for providers.
But even without the additional funding, for-profit hospitals have made some moves to prepare for more shutdowns such as accessing capital markets to add additional lawyers of bank liquidity, Kanarek said.
“We can only hope 2021 will look like a more normal year for hospitals, perhaps more like 2019, but there is still a lot of uncertainty out there,” he said.
Starting this month, some providers are facing the prospect of their Medicare payments garnished to repay COVID-19 loans.
The pressing Aug. 1 deadline has sparked concerns from some experts and hospital groups that worry providers couldn’t afford to lose out on Medicare revenue as they combat revenue losses caused by the pandemic. While the program was intended to be a short-term solution, COVID-19 surges are proving that is not the case for some hospitals.
At the onset of the pandemic in March, the Centers for Medicare & Medicaid Services (CMS) extended the advance payment program, which has been used previously to help providers beset by disasters such as hurricanes. Providers and suppliers could apply for advance Medicare payments to offset massive losses sparked by declines in patient volumes due to COVID-19.
Most providers could get up to 100% of their Medicare payments for a three-month period, and inpatient acute care hospitals, children’s hospitals and some cancer hospitals can request up to 100% for a six-month period. Critical access hospitals could have gotten up to 125% over six months.
CMS had given out $100 billion of loans before suspending the program.
“It was very effective because the process was already in place,” said Denise Burke, a partner with the healthcare compliance and operations group for law firm Waller Lansden Dortch & Davis.
The goal behind the program is to help providers stay afloat and was meant to be a short-term solution, as repayment starts 120 days after a provider gets the first payment. But that is the problem, experts say.
“It was intended as a short-term bridge so they could get through the summer before everything returned to normal, only problem is nothing has returned to normal,” said Dan Mendelson, founder and former president of consulting firm Avalere Health.
Now, repayment for the first loans are due on Aug. 1 as more and more states are seeing massive surges of COVID-19. Some major hospital systems, such as HCA and CHS, have been able to offset massive declines in revenue thanks to the loans and money from a $175 billion provider relief fund passed by Congress.
Hospitals have one year from the date of the accelerated payment to repay the balance of the loan, but Medicare Part A providers and Part B suppliers have 210 days from the accelerated payment to repay.
“CMS should think about relative to financial position of the provider,” Mendelson said. “Some providers are doing just fine and can repay loans just like everybody else.”
After the 120-day period is up, CMS will take 100% of Medicare claims payments that would have gone to the provider to offset the balance of the loan.
But it remains unclear whether CMS can change the terms of the repayment to give providers and suppliers more time, especially if they are struggling.
“CMS moves deadlines all the time,” Mendelson said. “The question is whether they can or are willing to exercise this discretion in this case.”
It also is unlikely that CMS will resume the program, which some provider groups have also called for.
“It seems unlikely CMS will continue to allocate money through the advance payment program that has fewer terms and conditions than allocating through provider relief fund,” Burke said, referring to the $175 billion fund that Health and Human Services is still allocating.
CMS did not return a request for comment as of press time.
A major problem for some hospitals is they may not have the liquidity available to repay the loans.
“There are a lot of hospitals struggling right now because volumes are off,” Mendelson said. “This comes down to the fact that people are staying away from the hospital to the extent they possibly can.”
Provider groups such as the American Hospital Association are imploring Congress to forgive the loans, or at the very least change the repayment terms.
For instance, some groups want to lower the interest rates to 50 or 25% of a Medicare payment as opposed to 100%.
But talks on a new COVID-19 relief package have stalled so far no deal has emerged.
Senate Republicans released their own package earlier this week that includes another $25 billion for providers and gives liability protections for hospitals and other businesses. But the package doesn’t include changes to the loans.