Hospital margins already under pressure are evaporating under the strain of COVID-19. According to a new report, half of all U.S. hospitals will be operating in the red by the end of the year without more federal relief.
The report prepared by Kaufman Hall on behalf of the American Hospital Association (AHA) sounds this dire alarm that threatens the quality of healthcare during a time when it’s most needed. Timing of the report coincided with the Senate’s return to work last month and talks focusing on a new relief package that as of today is still in limbo.
The report shockingly predicts that hospital margins could sink 7% in the second half of 2020, and that half of all hospitals are likely to operate with a negative margin.
Normally, hospitals typically operate with a 3.5% operating margin. But there was nothing normal about Q2. The lockdown and need to preserve capacity for combatting COVID-19 financially gobsmacked hospitals as patient volumes dropped and elective procedures were cancelled. Patients concerned with potential exposure to the virus—especially those in the vulnerable category—are driving the Q3 post-lockdown reduction in elective procedures.
With an uncertain future about containment/spread of the virus, the report revealed that margins are expected to drop to -3% in the second quarter of this year.
Urgently Seeking More Federal Support
In an AHA call with reporters, David Perlstein, M.D., president and CEO of SBH Health System in New York City, substantiated that the drop would have been negative 15% without $175 billion in funding provided by Congress a few months ago. He said, “Without the federal support we would have run out of cash and been forced to shut down the hospital.” The pandemic has cost Grady Health System in Atlanta $115 million, CEO John Haupert told reporters. About $70 million of that has led to a reduction of elective surgeries and another $45 million from increased expenses such as PPE.
A separate AHA analysis finds that the COVID-19 pandemic could cost hospitals $323 billion through the end of 2020. The cost increase includes higher prices to get personal protective equipment.
The AHA is pressing Congress for more relief funds and to change repayment terms for Medicare advance payments. The Centers for Medicare & Medicaid Services (CMS) doled out $100 billion in advance and accelerated payments to facilities at the onset of the pandemic in March. The program has since been suspended, and the AHA and other hospital groups are worried that CMS could start asking for repayment for those loans this month. The group is in talks with lawmakers over the need for changes to the program and is lobbying for Congress to pass legislation that forgives the loans.
Congress has yet to pass another round of COVID-19 relief. Although McConnell has said that healthcare and relief for providers has to be a major pillar in the next relief package, no specifics were given.
As the pandemic continues to wreak havoc with hospital financials, hospitals need to use every possible resource for kicking their revenue cycle into warp speed. They need to drive income as quickly as possible, and that calls for ensuring they have the most current, accurate insurance information for every patient at their fingertips. Avoiding reimbursement delays has never been more crucial. Automated solutions could be the lifeline hospitals desperately need. Find out more here.
Brad Skelton, maxRTE