Hospitals facing depleted volumes ask for more funds, advanced Medicare loan forgiveness

Dive brief:

  • About half of the country’s hospitals could be operating on negative margins by the end of 2020, according to a new analysis of Kaufman Hall backed by the American Hospital Association, as a nationwide increase in COVID-19 cases is hampering hospital efforts to return to pre-pandemic patient volumes.
  • The median operating margins of hospitals, which average 3.5%, fell to -2% in the first quarter of 2020, Kaufman Hall chief executive Ken Kaufman told reporters on a call Tuesday. They’re now at -3%, and without the CARES funding that was in the second quarter financial statements, they would have been -15%.
  • Without additional government support, margins could drop to -7% in the second half of 2020, according to the report. The AHA is urging Congress to secure more funding, as well as forgive advanced Medicare loans CMS made earlier this year that financially troubled hospitals will soon have to repay.

Dive overview:

When the first wave of COVID-19 cases flattened in northern states, hospitals across the country eagerly rescheduled delayed elective surgeries to help recoup lost income. But recent increases are overwhelming some hospitals, while others with insufficient capacity are struggling to get patients back.

Atlanta’s Grady Hospital has started rescheduling delayed elective surgeries until this week, when it reached 105% of capacity and ran out of available inpatient beds, CEO John Haupert said during the call.

At the same time, Grady’s emergency room visits are still on the decline, which Haupert attributes to the reluctance of patients to return to medical care. He said this was confirmed by chronic disease patients who slowly come back with exacerbated conditions, “because they didn’t seek the care they needed.”

Hospitals stand to lose a minimum of $ 120.5 billion in financial losses from July to December 2020, according to an AHA report released last month, largely due to declining patient volumes. But they also face increased spending, mainly by procuring adequate supplies of personal protective equipment.

In New York City, one of the few states to see a drop in cases, hospitals are still struggling to bring patients back for regular services, hampering their financial recovery.

David Perlstein, president and CEO of SBH Health System in Bronx, New York, said the system only sees about half of its pre-COVID ambulatory and surgical volumes after facing a wave of new cases and costs this spring.

The system placed orders for millions of dollars in PPE and ventilators, while paying for overtime and transportation costs for employees as the metro was closed earlier this year.

And even before the pandemic hit, SBH “was already facing its most difficult year” financially, Perlstein said.

Without CARES and the advancement of Medicare, we would have run out of money and had to close the hospital, ”Perlstein said. “Without additional investments, we won’t be here for the next one. “

This week, congressional lawmakers begin to negotiate a potential new round coronavirus aid, which may include funds for struggling health systems. The The Democratic-led House passed a $ 3 trillion relief package in May that met with little enthusiasm from the Republican-led Senate.

Congress has already sent tens of billions of dollars to hospitals through the CARES law passed in March in the form of grants that do not have to be repaid. CMS has also accelerated Medicare payments to providers in the form of loans that must be repaid 120 days after receipt, with the repayment deadline for early applicants looming later this month.

Hospitals, nursing homes and associated entities received about $ 92 billion from those payments, according to CMS.

AHA and the hospitals it represents are pushing Congress to write off the loans in the next package.

Sheila Currans, CEO of Harrison Memorial Hospital in rural Kentucky, said on Tuesday’s call that her facility’s operating margins are currently around -25%. She wrote to the office of Republican Senate Majority Leader Mitch Connell, R-Ky., asking that advance Medicare payments the hospital received earlier this year be forgiven.

It will be soon in September and we are not ready to start repaying anything, ”Currans said.

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