Nonprofit health systems — despite huge cash reserves — get billions in CARES funding

https://www.healthcaredive.com/news/nonprofit-health-systems-despite-huge-cash-reserves-get-billions-in-car/580078/

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Healthcare Dive’s findings revive concerns that greater examination of hospital finances is needed before divvying up COVID-19 rescue funding allocated by Congress.
The nation’s largest nonprofit health systems, led by Kaiser Permanente, Ascension and Providence, have received more than $7.1 billion in bailout funds from the federal government so far, as the novel coronavirus forced them to all but shutter their most profitable business lines.

At the same time, some of these same behemoth systems sit on billions in cash, and even greater amounts when taking into account investments that can be liquidated over time. That raises questions about how much money these systems actually need from the federal government given they have hundreds of days worth of cash on hand. Indeed, some big systems, like Kaiser Permanente, are already returning some of the funds.

And it revives concerns that greater examination of hospital finances is needed before divvying up rescue packages.

Nonprofits with more cash and greater net income tend to have received less funding — but not always

This is the second story of a Healthcare Dive series examining the bailout funds health systems received amid the COVID-19 pandemic. In this report, we focus on the 20 largest nonprofits by revenue and the amount of Coronavirus Aid, Relief, and Economic Security (CARES) Act funding they have received compared to the amount of cash on hand and recent financial performance. Healthcare Dive used bond filings filed as of June 12 to compile the amount of CARES funding received by health systems. In some instances, we relied on data from Good Jobs First, which also tracks the money. In addition to bond filings, we relied on annual audited financial statements and analyst reports to compile financial performance and days cash on hand.

Cash reserves

The cash hospitals have on hand has become an important metric to watch over the past few months as many have seen reserves dwindle to pay everyday expenses as revenue has dried up. At the same time, hospital volumes have plunged due to the economy grinding to a halt.

“You can’t write a payroll check off of accounts receivables, you have to write it off your cash and cash equivalents.” Rick Gundling, senior vice president of healthcare financial practices for Healthcare Financial Management Association, told Healthcare Dive.

In the early days of the outbreak in the U.S., some hospital executives sounded the alarm over dire financial straits, particularly small, rural hospitals whose executives warned they were weeks away from not making payroll. These pleas helped push Congress to pass massive rescue packages, with providers earmarked for $175 billion thus far.

Nonprofit health systems tend to keep more cash on hand than publicly-traded hospital chains. That’s because investor-owned facilities can raise capital more quickly, mainly through the stock market, while nonprofits have to rely on the bond market and their own operations, Gundling said.

Another important avenue that can boost cash is investments. It’s common for large nonprofits to rake in more in net income than they do from their core operations of running hospitals and caring for patients, in large part due to their investments in the stock market.

For example, Chicago-based CommonSpirit posted an operating loss of $602 million during its fiscal year 2019 but net income far exceeded that, totaling $9 billion. It was buoyed by investments and its recent merger, bringing together Catholic Health Initiatives and Dignity Health, according to its audited financial statement for the year ended June 30, 2019.

Many nonprofit health systems rake in more in net income than they do from their core operations

Ascension, the second-largest nonprofit system, received about $492 million in CARES funding, according to Good Jobs First. Ascension reported having 231 days cash on hand. Its unrestricted cash and investments totaled a sum of $15.5 billion as of March 31.

Kaiser, the nation’s largest nonprofit system, has about 200 days of cash on hand as of its fiscal year end, Dec. 31, according to a recent report from Fitch Ratings.

Providence, the third-largest nonprofit and first U.S. health system to treat a COVID-19 patient, reported 182 days of cash on hand as of March 31, according to a May bond filing.

However, Cleveland Clinic has the most cash on hand when measured in days among the top 20 nonprofits.

Cleveland Clinic had 337 days of cash on hand at the end of March, according to an unaudited financial statement from May. That’s nearly an entire year’s worth of operating expenses. The system has received $199 million in CARES funding, according to that same filing.

Rochester, Minnesota-based Mayo Clinic had the second most days of cash on hand with 252. Mayo Clinic has received $220 million in grant money, according to a May financial filing.

“You would never see that much cash on an investor-owned hospital,” Gundling said. “Generally, they want to pour that cash back into the services,” he said.

NYC Health + Hospitals, also the nation’s largest municipal health system, had the fewest days of cash on hand and it received $745 million in CARES funding, the second-most compared to other systems.

How health systems’ funding and cash on hand compare

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Risks of accepting bailout money

Sitting on a pile of money and accepting the bailout funds is already raising eyebrows.

“There is significant headline risk,” Michael Abrams, co-founder and partner at Numerof & Associates, told Healthcare Dive.

Worried about the optics, other institutions with considerable reserves or endowments have returned federal bailout funds, including Harvard University and major health insurers.

Providers are returning relief funds, too. Kaiser Permanente, the nation’s largest nonprofit by revenue, told the San Francisco Business Times it has returned more than $500 million in CARES funding. CEO Greg Adams the system “will do fine” despite the setback from the pandemic.

Mara McDermott, vice president of McDermott+Consulting, agrees there is a risk in accepting the grant money if systems possess such large reserves. Yet, she also cautioned that the healthcare ecosystem is so much more complicated.

“Regardless of the structure, it requires a deeper dive into need and that’s not what HHS did. They just wrote checks,” McDermott told Healthcare Dive.

Just because a parent company has a large cash reserve, it doesn’t mean that the money is readily available on a daily basis to a smaller practice it may own down the chain and one that hasn’t had any patients since March, she said.

“It’s easy to point the finger… but it’s much more complex than that,” she said.

The first tranche of money HHS sent to hospitals was based on Medicare fee-for-service business, and later on net patient service revenue. These formulas were criticized for putting some hospitals at an advantage compared to others, particularly those with larger shares of Medicaid patients. HHS has since released more targeted funding for providers in hot spots such as New York and plans to funnel funding to those serving a large share of Medicaid members in an attempt to address earlier concerns.

Still, without certainty of how long this public health crisis will last, no one knows how much cash on hand will ultimately be enough.

“A year’s cash on hand sounds like a lot of money but when you expend hundreds of millions of dollars a month, it won’t take you long to burn through that,” Scott Graham, CEO of Three Rivers Hospital, a 25-bed facility in rural Washington state, told Healthcare Dive.

Graham had feared in March that without quick intervention from the government, his hospital was near closure with just a few weeks cash on hand. The federal grant money has bought his hospital some time, about six months if volumes stay where they are, longer if they tick back up.

“I think what HHS did was right at the moment because we needed to ensure that the healthcare system survived this. It’s one thing for a small rural hospital to close, it’s another thing for the entire health system to collapse,” he said.

 

Moody’s: Patient volume recovered a bit in May, but providers face long road to recovery

https://www.fiercehealthcare.com/hospitals/moody-s-patient-volume-recovering-may-but-providers-face-long-road-to-recovery?mkt_tok=eyJpIjoiWmpjeVlXVTRZV0l5T1RndyIsInQiOiJLWWxjamNKK2lkZmNjcXV4dm0rdjZNS2lOanZtYTFoenViQjMzWnF0RGNlY1pkcjVGcFwvZFY4VjFaUUlZaFRBT1NRMGE5eWhGK1ZmR01ZSWVZWGMxOHRzTkptZVZXZmc5UnNvM3pVM2VIWDh6VllldFc3OGNZTTMxTDJrXC8wbzN1In0%3D&mrkid=959610

Moody's: Patient volume recovered a bit in May, but providers face ...

Patient volumes at hospitals, doctors’ and dentists’ offices recovered slightly in May but lagged well behind pre-pandemic levels, according to a new analysis from Moody’s Investors Service.

In all, the ratings agency estimated total surgeries at rated for-profit hospitals declined by 55% to 70% in April compared with the same period in 2019. States required hospitals to cancel or delay elective procedures, which are vital to hospitals’ bottom lines.

“Patients that had been under the care of physicians before the pandemic will return first in order to address known health needs,” officials from the ratings agency said in a statement. “Physicians and surgeons will be motivated to extend office or surgical hours in order to accommodate these patients.”

Those declines narrowed to 20% to 40% in May when compared to 2019.

Emergency room and urgent care volumes were still down 35% to 50% in May.

“This could reflect the prevalence of working-from-home arrangements and people generally staying home, which is leading to a decrease in automobile and other accidents outside the home,” the analysis said. “Weak ER volumes also suggest that many people remain apprehensive to enter a hospital, particularly for lower acuity care.”

The good news:  The analysis estimated it is unlikely there will be a return to the nationwide decline of volume experienced in late March and April because healthcare facilities are more prepared for COVID-19.

For instance, hospitals have enough personal protective equipment for staff and have expanded testing, the analysis said.

For-profit hospitals also have “unusually strong liquidity to help them weather the effects of the revenue loss associated with canceled or postponed procedures,” Moody’s added. “That is largely due to the CARES Act and other government financial relief programs that have caused hospital cash balances to swell.”

However, the bill for one of those sources of relief is coming due soon.

Hospitals and other providers will have to start repaying Medicare for advance payments starting this summer. The Centers for Medicare & Medicaid Services doled out more than $100 billion in advance payments to providers before suspending the program in late April.

Hospital group Federation of American Hospitals asked Congress to change the repayment terms for such advance payments, including giving providers at least a year to start repaying the loans.

Another risk for providers is the change in payer mix as people lose jobs and commercial coverage, shifting them onto Medicaid or the Affordable Care Act’s (ACA’s) insurance exchanges.

“This will lead to rising bad debt expense and a higher percentage of revenue generated from Medicaid or [ACA] insurance exchange products, which typically pay considerably lower rates than commercial insurance,” Moody’s said.

 

 

 

Recovery of medical staffing firms will lag behind hospitals, analysts say

https://www.healthcaredive.com/news/recovery-of-medical-staffing-firms-will-lag-behind-hospitals-analysts-say/580171/

COVID-19 Triggers Cash Need, Lenders Tighten Reins | PYMNTS.com

Dive Brief:

  • Though U.S. hospital staffing companies are slowly beginning to recover from the COVID-19 shutdown and corresponding drop in revenues, that rebound will lag behind hospitals.
  • Recovery of giants like ER staffing firm Envision and AMN Healthcare, which has the largest network of qualified clinicians in the U.S., will be hindered as hospitals prefer to keep their own staff employed over external contractors amid a recession.
  • The “pace of recovery will not be linear,” and depends on the mix of service lines and geography, S&P Global analysts said in a Thursday note. Analysts also expect hospitals to aggressively renegotiate rates and terms with staffing companies later in the year, which could depress margins even more in the long-term.

Dive Insight:

The collapse in patient volume following stay-at-home guidelines implemented earlier this year has had a well-documented effect on provider finances. Hospitals and doctor’s offices prepared for an influx of COVID-19 patients as lucrative elective procedures declined and revenues imploded.

At the nadir in April, anesthesiology services were down 70%, radiology down 60% and ER visits down 40%, S&P said. Analysts expect tentative recovery in May and June, but no return to pre-pandemic volume until mid-2021.

The dramatic reduction slashed the revenues and cash flows of staffing companies, though the worst is likely over. At the beginning of the pandemic, staffing companies and hospitals alike took preventive measures like furloughing nonessential and back-office workers, extending vendor payment terms, aggressively collecting old receivables and onboarding doctors to telehealth. Many have kept up adequate frontline capacity too, despite uncertain demand.

The economy saw some small gains in May as furloughed employees began to trickle back to work. But the increase in health services employment that month came largely in dental health workers and physician offices. Hospitals shed another 27,000 jobs.

Hospitals will likely fill staffing needs internally, bringing back furloughed or laid off employees first as operations slowly improve, before turning once again to medical contractors.

“Given the extended disruption, a looming recession, and possible lasting changes to health care providers, credit metrics will be much weaker than what we had previously expected for nearly all staffing companies,” analysts wrote. “Some staffing companies, particularly those that are highly leveraged, may face very significant liquidity pressures for several months. It is possible not all will be able to withstand the sharp decline.”

S&P Global has taken a number of negative rating actions on staffing companies since late March.

Envision and anesthesiology firm ASP Napa, both rated ‘CCC’ with a negative outlook, have the greatest potential for a default. Envision, owned by private equity firm KKR and one of the largest U.S. physician staffing firms, is reportedly considering a bankruptcy filing as it struggles with $7 billion in debt.

Knoxville, Tenn.-based Team Health and clinical practice management firm SCP Health have enough liquidity to chug along for several more months of lower-than-normal volumes, while AMN and Utah-based CHG Healthcare Services are both in more solid positions to weather the pandemic, S&P said.

But professional outsourced staffing businesses, like anesthesiology and radiology, should recover more quickly, and many firms have gotten financial support from lenders and private equity backers. Team Health, for example, approved a senior secured term loan from its PE sponsor, Blackstone, which covers interest payments in April through mid-May.

Liquidity was also helped by the passage of the $2.2 trillion CARES relief legislation late March.

Several staffing companies have reportedly received grants from the $100 billion allocated by the legislation for providers, along with no-interest loans from accelerated Medicare payments, sparking questions over whether companies backed by cash-rich private equity firms need the funds.

 

 

 

 

Trinity Health gets $2.2B in bailout funds, advance Medicare payments

https://www.beckershospitalreview.com/finance/trinity-health-gets-2-2b-in-bailout-funds-advance-medicare-payments.html?utm_medium=email

New Relationships for Health Plans: Accountable Systems of Care ...

Trinity Health saw revenue decline in the first nine months of fiscal year 2020, and the Livonia, Mich.-based health system ended the period with an operating loss, according to unaudited financial documents

Trinity Health saw revenue decline less than 1 percent year over year to $14.2 billion in the first nine months of the fiscal year, which ended March 31. The health system attributed the drop in revenue to the COVID-19 pandemic and the divestiture of Camden, N.J.-based Lourdes Health System in June 2019.

The 92-hospital system’s expenses were also up 1.2 percent year over year. Trinity Health ended the first three quarters of fiscal 2020 with expenses of $14.3 billion. Same-hospital expense growth was driven by increases in labor and supply costs, purchased services and costs related to its conversion to the Epic EHR platform in the Michigan region. The health system said the pandemic added $14.1 million of costs in March.

Trinity Health has taken several steps to reduce operating and capital spending in response to the pandemic, including implementing furloughs and reducing salaries for executives. In early April, Trinity Health announced plans to furlough 2,500 employees, most of whom are in nonclinical roles. 

Trinity Health reported an operating loss of $103.5 million for the first nine months of the current fiscal year, compared to operating income of $115.2 million in the same period a year earlier.

After factoring in investments and other nonoperating items, Trinity Health posted a net loss of $883.5 million in the first three quarters of fiscal 2020, down from net income of $457.9 million a year earlier. Nonoperating losses in the first nine months of fiscal 2020 were primarily driven by the pandemic’s effect on global investment market conditions in March, the health system said.

To help offset financial damage, Trinity Health received funds from the $175 billion in relief aid Congress has allocated to hospitals and other healthcare providers to cover expenses and lost revenue tied to the pandemic. The health system said it received a total of $600 million in federal grants in April and May. 

Trinity Health also applied for and received $1.6 billion of Medicare advance payments, which must be repaid.

Though Trinity Health is unable to forecast the pandemic’s impact on its financial position, it said the ultimate effect of COVID-19 on its operating margins and financial results “is likely to be adverse and significant.” 

 

 

 

HCA nurses say they face layoffs if they don’t give up negotiated pay increases

HCA nurses say they face layoffs if they don’t give up negotiated pay increases

HCA nurses say they face layoffs if they don't give up negotiated ...

Nurses at 15 HCA hospitals represented by National Nurses United protested last week, saying the for-profit hospital chain threatened layoffs.  Nurses took to the sidewalks outside of their hospitals with signs, after they said they were told to expect cuts to benefits and staff if they didn’t give up negotiated wage increases.

In an emailed statement, HCA said it had no plans for layoffs.

letter obtained by MedCity News threatened the possibility of reductions if the nurses did not accept HCA’s proposal.

The letter stated:

“The facts are that non-represented colleagues across the HCA Healthcare enterprise are taking pay reductions and non-represented colleagues are giving up wage increases this year. HCA Healthcare has made these tough decisions in order to preserve jobs. To be equitable to all of our colleagues across the enterprise, we recently reached out to unions, with the hope that during this time of crisis, they would support the same measures for our unionized employees to minimize the impact on your compensation and employment status. …  If the (National Nurses Organizing Committee) and/or (Service Employees International Union) reject our proposal, colleagues represented by these unions will no longer be eligible for continued pandemic pay, may be subject to layoffs and may face other benefit changes.”

Nurses interviewed by MedCity News said they were asked to give up other benefits.

Zoe Schmidt, a registered nurse who works at Research Medical Center in Kansas City, said they were also asked to forego their 401(k) matching for the year and shift differential pay, or increased compensation for nurses that work night and weekend shifts.

 

 

 

Private equity lands $1.5B in Medicare loans

https://www.beckershospitalreview.com/finance/private-equity-lands-1-5b-in-medicare-loans.html?utm_medium=email

One-Click To Private Equity Yields Up To 9%

Private equity companies have borrowed at least $1.5 billion from HHS through two programs intended to provide funding to healthcare providers facing financial damage due to the COVID-19 pandemic, according to Bloomberg‘s analysis of more than 40,000 loans disclosed by HHS. 

The Medicare loans were made to hospitals, clinics and treatment centers controlled by private equity firms through two programs administered by CMS: the Advance Payments Program and the Accelerated Payments Program. Those programs were expanded earlier this year to help offset the financial impact of COVID-19.

HHS approved loans totaling more than $60 million to subsidiaries of companies owned by private equity firm KKR, which has roughly $58 billion of cash to invest, according to Bloomberg. Healthcare facilities owned by private equity firm Apollo Global Management received $500 million in loans, and Cerberus Capital Management’s Steward Health Care System received roughly $400 million in loans. Steward physicians announced June 2 that they’re acquiring the health system from Cerberus.

CMS Administrator Seema Verma said the goal of the programs was to get funds to healthcare providers as quickly as possible. The loan applications did not include questions about beneficial ownership of the healthcare companies seeking loans. 

“We don’t look into ownership, what we look into is are they Medicare-enrolled providers,” Ms. Verma told Bloomberg.

Access the full Bloomberg article here.

 

 

 

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

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’

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

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.

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.”

 

 

 

Ascension reports loss of $2.7B in Q1

https://www.healthcaredive.com/news/ascension-reports-loss-of-27b-in-q1-COVID/578579/

Dive Brief:

  • Ascension reported a total loss of $2.7 billion in the first three months of 2020, compared to income of $1.2 billion during the same time last year, according to new ​financial statements from the nonprofit giant.
  • The Catholic system, one of the largest hospital operators in the country, saw operating revenue decrease 2.5% year over year in the period ending March 31 to $6.1 billion. That came as expenses like salaries and supplies ticked up by more than 3% to $6.4 billion.
  • Ascension also reported losses from investments of $2.48 billion, compared to return from investments of $1.1 billion from the same time last year. Nonprofit operators are reporting massive investment hits as the stock market slid in the beginning of the year following widespread business closures and shelter-in-place orders stifling the economy.

Dive Insight:

Nonprofit hospitals are posting huge losses for the outset of 2020 as analysts predict an even grimmer second quarter to come. However, though losses in the first three months of the year dragged St. Louis-based Ascension into the red, the provider behemoth is still in a relatively good position to weather the pandemic, with current assets of $38.3 billion and 231 days of cash on hand.

Though patient volume was up prior to the pandemic, revenue from providing medical care flagged in the three-month period, as inpatient and ambulatory care slowed as the coronavirus surfaced in the U.S. In mid-March, Ascension deferred all non-essential procedures as stay-at-home orders kept potential patients in the home, impacting the system’s volumes.

Total net patient service revenue was $5.7 billion, down 3% year over year. Net patient service revenues had the sharpest drop off in March, decreasing more than 15% in that month alone.

“COVID-19 has been encountered across all Ascension markets, to varying degrees, and has had an adverse effect,” Ascension management wrote in comments on the results.​

The system, which operates more than 2,600 sites of care, including 150 hospitals across 20 states and the District of Columbia, has received federal help to make up for lower-than-expected revenue. Ascension said in the filing it has received Coronavirus Aid, Relief and Economic Security Act​ funding before March 31. Though a spokesperson declined to tell Healthcare Dive a specific figure, Ascension has received at least $211 million from HHS, according to a New York Times review of the grants finding large hospitals with deep pockets are receiving the lion’s share of congressional funds.

Smaller hospitals that serve more vulnerable populations were deeply critical of HHS’ initial method to distribute the CARES funds, which put high margin hospitals at an advantage. The department did not take into account hospitals’ existing financial resources in distributing the pot.

Nine-year-old Ascension also received just under $2 billion in accelerated loans from the Medicare program.

Normal increases in operations compounded the negative effect of the pandemic, Ascension said. The system was funneling money into expanding service lines and sites of care and standardizing revenue cycle services prior to the COVID-19 crisis, which sharply increased expenses.

Supplies expenses particularly jumped in March by almost 7%, as the system hustled to procure needed equipment at unexpected rates to prepare for an anticipated surge in COVID-19 patients.