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Our Take: More hospitals start to receive emergency funding; for many, it’s none too soon

Apr 27, 2020
On Friday, the Department of Health and Human Services (HHS) began distributing the second round of the $100 billion in funding allocated for hospitals under the CARES Act.

The first round, totaling $30 billion, was distributed on April 10 and 17 and was based on the recipients’ historical Medicare fee-for-service spending. The current round, essentially representing the remaining $70 billion, will be paid out on a rolling basis and will be distributed as follows:
  • $20 billion to providers in general, based on their 2018 net patient revenue from all sources, not just Medicare
  • $10 billion to providers in “hot spots” with an especially large number of COVID-19 cases (this is in addition to funding received as part of the $20 billion noted above)
  • $10 billion to an estimated 2,000 hospitals and 1,100 health clinics in rural areas
  • $400 million to Indian Health Service facilities
  • Unspecified amounts for skilled nursing facilities; dentists; providers that treat mostly Medicaid beneficiaries; another round of funding for hot spots, if needed; and reimbursement for care given to uninsured patients
The newest coronavirus relief package, totaling $484 billion, was passed and signed into law last week. That legislation includes an additional $75 billion for hospitals, as well as $25 billion for COVID-19 testing and contact tracing.

Our Take: Emergency funding is finally starting to reach some of the providers that desperately need it, and it appears that more is on the way.
Will it be enough, though?

Each week we read about major health systems having to furlough or lay off hundreds or even thousands of workers, while others are pulling their 2020 financial guidance because the outlook is just too shaky. Last week was hardly an exception:
  • Southfield, Mich.-based Beaumont Health announced that it was temporarily laying off about 2,475 employees and permanently terminating an estimated 450 positions after reporting a net loss of $278.4 million in the first quarter.
  • Henry Ford Health System made a similar announcement, stating that it would furlough 2,800 workers. Henry Ford said it recorded a $43 million loss in operating income last month and expects even greater losses in April and May. Senior executives at both health systems are taking temporary pay cuts to help address the situation.
  • Mayo Clinic said it would furlough or reduce the hours of about 30,000 of its staff, starting in May, the Post Bulletin reported. The health system anticipates operating losses of $3 billion in 2020 as a result of the pandemic. Physicians and top executives at Mayo Clinic will see temporary salary reductions.
  • Although Cleveland-based University Hospitals has yet to implement any outright furloughs, it did announce that it was reducing the hours and/or pay of approximately 4,100 nonclinical employees, initially for 10 weeks. CEO Thomas Zenty said in a press statement that federal resources would “not nearly make up for” the health system’s financial losses.
  • Hospital operator HCA Healthcare, based in Nashville, Tenn., and the largest in the U.S., reported first-quarter profit that was down nearly 45% compared with the same period in 2019. Notably, the downturn in HCA’s financial performance didn’t start until mid-March, according to Healthcare Dive.
Meanwhile, as many as one-fifth of the 2,600+ primary care clinicians who responded to a recent survey said their practice could end up closing within the next month, Healthcare Dive reported. More than two-fifths already have had to resort to employee furloughs or layoffs.

Though it can seem counterintuitive to some, decreased patient volume is one of the main reasons that so many providers are struggling financially. Hospitals and health systems of all sizes depend on elective surgeries to turn a profit, and in most places those procedures have been a no-go for over a month now.

Fortunately, CMS has released initial guidance for gradually resuming in-person, essential but non-emergent, non-COVID-19 care — in regions with relatively few COVID-19 cases. The guidance suggests starting with elective outpatient procedures first and then adding elective inpatient procedures in the next phase. The American College of Surgeons also issued recommendations, and some state health authorities have initiated steps to relax the restrictions on elective procedures as well. For providers in at least some parts of the country, this is encouraging.

The upshot is that until a much larger percentage of the population has undergone antibody testing so that we can get a better idea of how widespread the infection rate truly is, and until we see whether there’s a strong surge in COVID-19 cases when businesses begin to reopen and daily life starts to take on some semblance of normalcy once again, there’s simply no way to forecast how severe the financial toll on the nation’s hospitals and health systems will be.

Health Affairs published an interesting study last Thursday that attempted to model the potential costs of the COVID-19 pandemic in the U.S. When taking into account just the direct medical costs associated with the disease, the range was from $163.3 billion (if 20% of the population becomes infected) to $654 billion (if 80% becomes infected).

Who will bear the brunt of that cost? Time will tell.

What else you need to know
Dr. Patrick Soon-Shiong bought St. Vincent Medical Center from Verity Health Systems for $135 million. Verity filed for Chapter 11 bankruptcy in 2018 and closed the Los Angeles hospital early this year. California used emergency funding in March to lease St. Vincent and, in partnership with Kaiser Permanente and Dignity Health, reopened the facility as the Los Angeles Surge Hospital to treat patients with COVID-19. Dr. Soon-Shiong will take over the lease and will use other buildings on the St. Vincent campus to conduct coronavirus-related research, according to a press release.
Beaumont Health and Summa Health are delaying their merger, Cleveland.com reportedWednesday. The plan is for Akron, Ohio-based Summa Health to become a wholly owned subsidiary of Southfield, Mich.-based Beaumont Health; the two health systems announced their intentions to merge last July and signed a definitive agreement in January. A spokesman for Summa Health said the priority right now is dealing with the pandemic, and that the health systems “remain committed to finalizing all necessary details to close this transaction when appropriate.”

Biogen, Partners Healthcare, and the Broad Institute of MIT and Harvard are collaboratingon a COVID-19 biobank of de-identified biological and medical data. Initially, the data will be derived from blood samples from Biogen employees who were infected at a corporate management meeting in late February and others who had close contact with them. The hope is that studying this “clustered group of patients with a common exposure” will provide insight as to why some people develop COVID-19 symptoms and others do not. The biobank could also give researchers a better understanding of recovered patients’ immune profiles, which could assist in the development of treatment options.

Nurses aresuing the state of New York, Montefiore Medical Center, and Westchester Medical Center (WMC). The New York State Nurses Association, a union that represents 42,000 members, filed the three lawsuits seeking injunctive relief for what it claims are unsafe working conditions, citing lack of proper training for redeployment and lack of personal protective equipment. The lawsuit against WMC also alleges that the hospital intimidated nurses who spoke publicly about deficiencies in WMC’s response to the coronavirus outbreak. The complaint against Montefiore says that, statewide, at least eight of the union’s member nurses have died after contracting COVID-19 at work and at least 84 have been hospitalized with the disease.

Coram, a unit of CVS Health, is working with UCLA Health to free up hospital beds for patients with COVID-19. A provider of infusion therapy services, Coram is enhancing its in-home nursing capabilities to help eligible patients receiving IV therapy transition from inpatient to home-based care. While the initial focus will be on California, CVS Health said in a news release that Coram is scaling the effort nationwide to assist in other areas with high rates of COVID-19 cases.

The FDA authorized the first COVID-19 test that will let patients collect a sample at home. Specifically, the emergency use authorization for LabCorp’s COVID-19 RT-PCR test was reissued to allow the testing of nasal swab samples that patients collect using a LabCorp home collection kit. The samples are to be mailed in insulated packages to LabCorp for testing. The FDA’s press releasesaid LabCorp plans to make the kits available to consumers “in most states, with a doctor’s order, in the coming weeks.”

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