Rochester Business Journal - June 5, 2020
IN THE EMERGING HEALTHCARE GAUNTLET, NATIONAL SUPPORT CRITICAL
Let’s face it, the majority of businesses are struggling right now and health care is no exception. Two health systems are the largest two employers in the Greater Rochester area, so it’s in all of our interest to be aware of the eroding financial condition of local hospitals and health systems, the vital cornerstones of every community in our region.
After hospitals, physicians, nurses and staff exerted heroic efforts to prepare for and respond to the COVID-19 pandemic, they now face extraordinary challenges trying to recover from this unprecedented crisis and ensure they will be there to care for patients and be the economic pillars of our communities in the future.
Hospital Financial Catastrophe
April 2020 was the worst month in history for America’s hospitals in terms of operating margins as, nationally, margins fell to negative 29%, according to an analysis by Kaufman Hall. The nation’s hospitals and health systems will lose more than $202 billion between March 1 and June 30, projects the American Hospital Association, due to increased COVID expenses and lost revenue.
Upstate New York hospitals lost $1 billion in revenue through April as they canceled all non-emergent procedures and services both to clear capacity for COVID patients and preserve precious personal protective equipment (PPE).
That $1 billion loss does not reflect the myriad of additional COVID expenses incurred to expand capacity, reconfigure operations and buy PPE, now used by many more health care workers all the time. Additionally, the cost of scarce PPE has skyrocketed: N-95 masks went from 38 cents pre-COVID to $5.75 and isolation gowns from 25 cents to $5.00 on average, to give just two examples.
The University of Rochester Medical Center (URMC) has been forced to furlough 3,400 employees and senior executives have voluntarily reduced compensation by 18% as it loses $130 million a month and strives to fill a $500 million budget gap. Across upstate, well over 6,000 employees have been laid off or furloughed.
Slowly Resuming
Recently, the state allowed hospitals to resume non-emergency elective procedures. Hospitals and physicians, relieved to bring patients in for long-deferred procedures and diagnostics, prioritized patients based on medical condition, rushing those with cancer, cardiac and other urgent needs to treatment.
One might expect a flood of patients given pent-up demand. Yet fear of contracting COVID has kept patients away. Not just for elective procedures, but treatment for life-threatening illness has declined significantly as well: cardiology experienced a 55% decline in services, breast health 57%, and oncology 37%, according to an analysis by Strata Decision Technology.
Even emergency room visits dropped nationally, and by 50 % locally at one system, with patients arriving sicker after waiting to seek care and some tragically dying at home, never trying to go to a hospital.
Clearly, hospital revenue will return only gradually and capacity will be curtailed into the future to ensure COVID safety. Even if an immediate return to business as usual was possible, it would be impossible to recoup what will be catastrophic losses, leaving hospitals in the Rochester region in financial peril for some time to come.
The Nation’s Support Is Needed During a National Emergency
Without a doubt, more federal aid is needed for hospitals, health systems and the front-line health care heroes caring for COVID patients.
Unfortunately, a misperception has arisen that hospitals “have been taken care of.” The $175 billion in emergency funding provided in the Coronavirus Aid, Relief and Economic Security (CARES) Act has been inaccurately described as “hospital funding.”
That is correct in theory. Congressional intent was to help providers on the front lines of COVID response – overwhelming hospitals and their health care heroes.
The reality is that the Department of Health and Human Services (HHS) distributed much of the initial tranche of $50 billion in funds to all types of health care providers, including podiatrists, physical therapists and durable medical equipment suppliers, based on prior Medicare business.
HHS provided another tranche for COVID “hot spot” and rural hospitals, $12 billion and $10 billion respectively. New York’s high-COVID hospitals rightfully received $5.7 billion of the former and $260 million in rural funding.
Of all CARES emergency aid distributed thus far, New York hospitals and health systems received almost $8 billion. That is only 9% of funding when New York State treated 40% of COVID patients!
Moreover, Upstate hospitals received just 10% of New York State’s $8 billion, an indication that HHS did not adequately account for the detrimental impact of lost revenue in its allocation.
Finally, and remarkably, HHS has yet to distribute $98 billion of CARES aid, which is called emergency funding, implying urgency. The law was enacted on March 27, more than two months ago. Hospitals and health systems desperately need that emergency funding distributed immediately as well as substantial additional federal aid.
The House passed the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act on May 15, which includes a critically important $100 billion for hospitals. We are grateful for the ongoing support of members of the New York congressional delegation, especially Reps. Joe Morelle, Tom Reed and John Katko. Some in the Senate reject the House approach, claiming hospitals “have been taken care of.” We will rely on staunch hospital allies Sens. Chuck Schumer and Kirsten Gillibrand to convince them otherwise.
An Added Nursing Home Challenge … And Payers Opt Out
Another essential component of our community health system is nursing homes that care for older, frail and some of our most cherished citizens. The business community should be aware of a new challenge for New York nursing homes that may impact their ability to care for residents and remain financially viable.
A state mandate effective May 18 requires nursing homes to test all staff twice weekly for COVID so COVID-positive staff can stop working for at least 14 days of quarantine and recovery to keep the virus away from residents and colleagues.
Nursing homes do all in their power to protect residents and staff. However, without substantial financial and logistical support, administrators fear they will not be able to properly implement this policy.
The state thus far has been sending test kits to nursing homes. Administrators hope that continues since the state has more purchasing power and, due to supply shortages, tests are difficult to procure and have become more expensive.
Second, nursing homes worry about delays in getting test results back. The lab assigned by the state to handle the Rochester region already had a 3½-day turnaround time to process tests, even before adding thousands of new nursing home staff tests weekly. Delayed test results will complicate caregiver scheduling and strain operations, which is not fair to staff or reassuring for residents.
Third, it appears nursing homes and adult care facilities will incur the significant costs - about $100 per test - despite a requirement by the state that insurers cover the tests. On May 19, the Department of Health deemed nursing home/adult care facility staff testing to be medically necessary and the Department of Financial Services, which regulates insurers, required health plans to cover staff tests.
Shortly thereafter, insurers refuted the state’s authority to require coverage and made it clear they will not pay for asymptomatic staff testing. It is unclear whether the state will take them to court.
Five nursing homes in the Rochester region will spend an estimated $750,000 a week for approximately 8,800 tests they will need, according to the Alliance for Senior Care. Statewide, nursing homes and assisted living facilities will require about 370,000 tests at a cost of approximately $44.4 million per week, according to LeadingAge New York.
These amounts exclude considerable staff time and other costs associated with coordinating and administering the testing.
State Medicaid Cuts Another Gauntlet
Nursing homes and hospitals rely heavily on the state Medicaid program, as will more New Yorkers as so many have lost their jobs and health insurance.
Unfortunately, just as hospitals, health systems and nursing homes incur significant new expense and need additional financial support to face an unprecedented pandemic, Governor Andrew Cuomo on May 22 implemented an additional across-the-board (ATB) Medicaid cut of 0.5%, effective retroactive to April 2.
When combined with the 1% ATB cut he enacted on December 31, 2019, the total reduction in state Medicaid payments to hospitals and health systems totals $900 million for state fiscal year 2020. The federal government matches state Medicaid payments, so hospital losses will be twice that or $1.8 billion this year.
In addition, the Governor has made it clear that, because the state’s budget situation is so dire (revenues are down $13.3 billion since COVID’s start), unless the federal government provides substantial aid to states, Medicaid (along with education and local government) will be cut by another 20 to 30%. If a 20% cut is implemented, when combined with the lost federal match, hospitals and health systems would see another $1.6 billion in Medicaid cuts through March 31, 2021.
Clearly this would be untenable. Some hospitals in our region would not survive and others would be forced to curtail needed yet financially draining services.
The House HEROES Act includes $500 billion in state funding. We hope the Senate acts quickly to pass their relief package and that it contains that level if not more funding for states and retains the HEROES emergency funding for hospitals.
I urge our partners in the business community to closely watch hospital and health system efforts to recover and rebuild and to advocate for and support that work.
As with so much right now, the “new normal” for hospitals and health systems is unknown. We do know that it is essential for our communities to have strong hospitals, health systems and their health care heroes ready to care for all patients with compassion and ready should we experience another COVID surge in the future.
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About Pandion Healthcare: Education & Advocacy
Pandion Healthcare: Education and Advocacy (formerly known as Rochester Regional Healthcare Association) is a not-for-profit 501(c)3 association whose membership is comprised of 17 hospitals and their related health systems in the nine counties of Monroe, Livingston, Ontario, Wayne, Seneca, Yates, Allegany, Steuben, and Chemung. The Association works with various peer groups comprised of representatives from its membership to enhance their organization's ability to meet the healthcare needs of their communities by sharing information and best practices. Pandion Healthcare: Education and Advocacy works closely with the Healthcare Association of New York State (HANYS) and the American Hospital Association (AHA), collaborating on many issues and activities.