General • Published 4/13/2020 How Healthcare Facilities Can Treat the Financial and Operational Symptoms of the COVID-19 Pandemic

Last updated on 4/13/2020

Healthcare providers of all types are being significantly impacted by COVID-19. The pandemic presents numerous challenges for hospitals, specialty hospitals, rural hospitals, private physician practices, and other types of providers, including declines or shifts in revenues, operations management, staffing and supply shortages, and navigating potential opportunities.

No healthcare provider will be unaffected through the pandemic, which is why operational and financial leaders must have a long-term mitigation strategy in place, including leveraging government stimulus programs that can make an enormous difference between liquidity and financial distress.

Declines in Revenue

As the pandemic continues, healthcare providers of all types face significant loss of revenue. To help “flatten the curve” and reduce exposure to the virus, the CDC and LDH have directed providers to cease elective procedures. Additionally, patients are choosing to defer routine physical care. Coupled together, these revenue reductions are placing significant financial stress on providers, which is exacerbated by the fact that elective cases provide disproportionately high revenues compared to COVID-19 cases, which are generally poorly reimbursed. While the federal government has approved increased payment for such cases, this may not adequately cover the increased staffing costs for critically ill patients. Additionally, COVID-19 patient care requires increased costs to protect staff and for potential surge expansion.

The complexity of loss of revenue and increased costs over the coming months (or years) requires a laser-focus on cash flow and financial projections, including considerations of leveraging financial resources such as lines of credit, salary reductions, and/or government programs.

Shifts in Patient Care

Physician Practices: Telemedicine

While physician practices have traditionally focused on in-person patient care, COVID-19 has led many practices to implement virtual care where feasible, often requiring an investment in infrastructure, secure telehealth platforms, and hardware and software. Because of this, the CMMS (Medicare) has relieved many prior restrictions on telehealth to facilitate patient care while minimizing exposure to other patients. While this cuts through some of the red tape, practices must spend time to implement and train providers and business teams to function in a telemedicine environment, including coding, documentation, and billing of telemedicine visits in order to obtain reimbursement from their participating payers. In addition to this shift in technology, the government is offering means to mitigate financial distress for providers.

Hospitals: Expansion

To treat the expected number of COVID-19 patients, hospitals may need to increase capacity through adding beds, securing offsite treatment options, or increasing capacity for remote operations. Regardless of the best options for each facility, emergency expansion can exhaust capital, management resources, staffing, and supply chains.

Government Programs

The Coronavirus Aid, Relief, and Economic Security (CARES) Act offers a combination of initiatives and funding for the health care industry, with billions of dollars earmarked for providers, including $100 billion to reimburse for COVID-19 expenses and lost revenues for hospitals and other eligible providers. Examples will vary for each provider; a high-level overview is included below:

• For hospitals:
  • Suspension of the 2% sequester for Medicare payments and cuts to DSH payment.
  • Add-ons to in-patient Medicare payments of 20% for treating COVID-19 patients.
• Paycheck Protection Program via the Small Business Administration:
  • A federal loan program to help small businesses continue operations and keep employees on the payroll as well as covering mortgages, rents, and utilities.
  • Providers eligible for such loans are also potentially eligible for forgiveness.
• Economic Injury Disaster Loans where businesses can receive up to $2,000,000.
• Medicare Advanced Payment Program provides up to three months of guaranteed revenues, based on historical billings.
• Other programs:
  • Enhanced Unemployment Benefits with both extended timelines and higher benefits.
  • Tax payment extensions.
  • Support for PPE purchases and COVID-19 testing costs.

How P&N Can Help

Our experienced team of health care business advisors can help provide realistic projections of activity, resulting revenues, potential cost reductions, and liquidity concerns, as well as assist in planning for cash flow maintenance by leveraging access to credit, government programs, the revenue cycle, and careful compensation planning.

• Financial projections/cash flow planning:
  • Model likely revenue declines.
  • Project required changes in operations, expenses, staffing, compensation, scheduling, partner cash draw/deferral, capacity, supplies and equipment, and other pertinent factors.
• Operations re-engineering:
  • Target staffing levels and furlough plans.
  • Remote planning for revenue cycle management.
  • Collaborations on purchasing.
• Properly leveraging government stimulus programs.
• Provide interim executive-level support (e.g., CEO, COO, CFO).

Healthcare providers are in unchartered territory, and the need to carefully navigate exponentially increasing patients with the potential need to cut costs is both complex and time-consuming. If P&N can assist your team in surviving and recovering from the pandemic with sound financial and operational strategies, please reach out.