Hospitals facing depleted volumes beg 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 from Kaufman Hall backed by the American Hospital Association, as a national surge in COVID-19 cases stymies hospitals’ efforts to return to pre-pandemic patient volumes.
  • Median operating margins for hospitals, which average 3.5%, fell to -2% in the first quarter of 2020, Kaufman Hall Managing Director Ken Kaufman told reporters on a call Tuesday. They’re now at -3%, and without CARES funding that appeared in second quarter financial statements, would have reached -15%.
  • Without further government support, margins could sink to -7% in the second half of 2020, according to the report. AHA is urging Congress for more funding, as well as to forgive the advanced Medicare loans CMS made earlier this year that financially struggling hospitals will soon have to pay back. 

Dive Insight:

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 revenues. But recent surges are overwhelming some hospitals, while others not near capacity are struggling to get patients back in.

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

At the same time, emergency room visits at Grady are still down, which Haupert attributes to patient reluctance to return to medical settings. He said that’s confirmed by patients with chronic diseases who are slowly returning with exacerbated conditions, “because they did not seek the care they needed.”

Hospitals stand to lose a minimum of $120.5 billion in financial losses from July to December of 2020, according to a report from AHA released last month, in large part due to lower patient volumes. But they’re also facing increased expenses, primarily in procuring adequate supplies of personal protective equipment.

In New York, one of few states seeing declining cases, hospitals are still struggling to get patients back in for regular services, hampering their financial recoveries.

David Perlstein, President and CEO of SBH Health System in the Bronx, New York, said the system is only seeing about half of its pre-COVID ambulatory and surgical volumes after dealing with a surge of new cases and costs this spring.

The system put in orders for millions of dollars worth of PPE and ventilators, while also paying overtime and transportation costs for employees while the subway was closed earlier this year.

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

Without CARES and the Medicare advancement we would have run out of cash and be forced to shut down the hospital,” Perlstein said. “Without further investments we will not be here for the next one.”

This week congressional lawmakers start to negotiate a new potential round of coronavirus aid, likely to include funds for struggling health systems. The Democratic-led House passed a $3 trillion relief package in May that’s garnered little enthusiasm from the Republican-led Senate.

Congress has already sent out tens of billions of dollars to hospitals through the CARES act passed this March in the form of grants that don’t have to be paid back. CMS also accelerated Medicare payments to providers in the form of loans that have to be repaid 120 days after they’re received, with the repayment deadline for early applicants looming later this month.

Hospitals, nursing homes and related entities have gotten about $92 billion in these payments, according to CMS.

AHA and the hospitals it represents are pushing for Congress to forgive the loans in the upcoming package.

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

It’s gonna be September soon and we’re not ready to start paying back anything,” Currans said.