Even with billions in new funding in a Senate emergency package agreed to early Wednesday, hospitals could still lose more than $1,000 per COVID-19 patient, according to a new report, the latest sign of an industry facing big losses amid the pandemic.
Health systems are looking at a major financial hit from the COVID-19 outbreak as their typical playbook of relying on elective procedures to offset unprofitable treatment has been forced aside.
As hospitals ask Congress for $100 billion in financial relief, the Medicare rate raise Congress is currently considering wouldn’t be enough, according to some data. Lawmakers reportedly reached a deal early Wednesday on a stimulus package that includes $130 billion to hospitals, but details weren’t immediately released.
Without help from Washington, the vast majority of health systems in the U.S. will lose an average of $2,800 per COVID-19 case, while some would lost as much as $10,000, according to a new report from research firm Strata.
If the Medicare reimbursement rate for the cases is raised 20%, as was discussed in the stimulus packages debated on Capitol Hill, systems would still be losing an average of about $1,200 per case, according to the data.
That, coupled with the loss of lucrative elective procedures — which most hospitals have halted amid the outbreak — could be catastrophic for facilities, especially those in rural areas and with little cash on hand.
“It will eat through cash reserves that these organizations have, to the extent that they have them,” Steve Lafar, executive director of Strata Data Science, told Healthcare Dive. “Nobody is going to be immune from taking pretty big hits.”
Strata recommends increasing the rate for diagnosis related groups (DRGs) associated with COVID-19 treatment like use of ventilators and treatment of pneumonia and acute respiratory distress by 35% to help offset the loss.
Some health systems are taking steps to prop themselves up financially as they lobby Congress for more funds. HCA Healthcare last week reached a credit agreement with Bank of America and Wells Fargo Bank for the ability to tap term loans adding up to $2 billion “to enhance the Company’s financial flexibility in light of the current uncertainty resulting from the novel coronavirus pandemic,” according to a filing with the Security and Exchange Commission.
The nation’s largest for-profit hospital chain said is was also suspending share repurchasing and deferring certain capital expenditures and would “make certain other operational adjustments as deemed appropriate.”
The Strata report used research from China, Italy and the Centers for Disease Control and Prevention to simulate a typical COVID-19 patient along with data from 32 health systems on the DRGs those cases have. The researchers assumed hospitals would be working at 110% capacity and would treat 225,000 COVID-19 patients over 30 days.
Following a push from CMS, hospitals have by and large declared they are postponing elective procedures to free up space for COVID-19 patients, conserve staff and equipment and avoid exposing healthy people to the novel coronavirus. A few facilities in areas not as hard hit yet have avoided that move, and received some criticism.
But hospitals rely on those procedures to balance more costly care.
As more COVID-19 cases flood to hospitals, the facilities will also have to use resources to increase bed capacity, find staff and purchase more equipments, further straining them financially.
Some hospitals are better positioned for the crisis, based mostly on payer mix and cost structure, Lafar said. “It’s really about balance sheet strength,” he said. “Those who have better access to credit, those who have large, diverse systems have perhaps the balance sheet to withstand it for some period.”
Hospitals have been pleading for more financial assistance as case numbers from the novel coronavirus increase at a rapid rate with no signs of slowing. The American Hospitals Association in a letter to Congressional leaders late last week said hospitals are losing up to $1 million a day in addition to facing shortages of critical supplies and personal protective equipment.
“Congress needs to assist hospitals, physician practices and other providers on the brink of financial collapse so they are able to make payroll to front line health care personnel and all employees in order to ensure that as many inpatient beds as possible are available during this pandemic,” AHA wrote.
Rural hospitals, AHA warned, will be in dire straits. Lafar said they could be looking for a fundamental operations change to stay afloat, but that, too, is complicated by the pandemic.
“They’ve been hurting already, and they don’t have the cash balances,” he said. “What we could see happen is the rural institutions that are affiliated with large regional networks or large national networks have no choice but to fold in with bigger systems. But I’m not sure how those deals get done at this point.”
Moody’s Investors Service and Fitch Ratings have issued grim forecasts for nonprofit hospitals as the crisis continues. “Lower-rated, typically smaller, single site facilities, and those credits with comparatively lower liquidity levels, particularly in areas with a high concentration of people who are 65 and older, are more vulnerable to near-term pressures,” Fitch researchers said in a report late last week.
On Tuesday, Fitch downgraded UPMC’s bond ratings to A from A+ on the health systems plan to increase long-term debt and borrow $1 billion in short-term capital this year to deal with the pandemic response, which Fitch said “has created an uncertain environment for the entire healthcare system in the near term.”
The ratings agency wrote: “While UPMC’s financial performance through the most recently available data has not indicated any impairment, material changes in revenue and cost profiles will occur across the sector, and will likely worsen in the coming weeks and months as economic activity suffers and government restrictions remain in place or expand.”