By Ketan Patel, Advisory Principal, Healthcare, KPMG
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) packaged financial and regulatory relief for healthcare providers to address a major health emergency, but as we approach the end of 2020, some provisions are ending.
Harris County health officials said the Houston metropolitan area is dealing with 16,373 active cases and 1,389 of the 108,819 confirmed cases, as of Sept. 3. Officials describe the state of COVID-19 as “severe and uncontrolled” with outbreaks present and worsening.
In addition to providing funds to act as a bulwark against COVID-19’s economic disruption, the CARES Act’s financial relief for health care providers addresses reduced patient volumes as elective procedures were put on hold. Outside this law, the Centers for Medicare & Medicaid Services and U.S. Department of Health & Human Services acted to ensure greater financial liquidity for healthcare providers.
These are some of the changes that the CARES Act provided, as listed in a synopsis of the CARES Act from KPMG’s Center for Healthcare Regulatory Insight, as well as additional relief. Some of the benefits, however, had a limited duration:
- Increases payments to hospitals for the treatment of patients diagnosed with COVID-19 by 20%.
- Temporarily suspends the 2% reduction in Medicare payments to providers from May 1, 2020 through Dec. 31, 2020, and extends the Medicare sequester one year beyond current law (from 2029 to 2030).
- Delays Medicaid disproportionate share hospital reductions, which Texas health officials estimated at $26 million for fiscal 2020, until December 1, 2020.
- Prevents a scheduled decrease in payment amounts for durable medical equipment through the length of the public health emergency to help patients transfer from hospital to home care.
- Accelerated payments to qualified healthcare providers from CMS during the duration of the public health emergency starting in late March. Those accelerated payments had reached the three-month deadline for most providers in late June, but they are nearing the six-month end for critical access hospitals, inpatient acute care hospitals, children’s hospitals and certain cancer hospitals.
CARES Act also relaxed regulations around telehealth, home health services, and waivers during the health emergency for the inpatient rehabilitation facility “three-hour rule” — a requirement for patients to get at least three hours of therapy per day for five days — and the “50-percent rule”— for facilities that do not have a discharge percentage of at least 50% — at long-term care hospitals.
While some changes, particularly those around telehealth, may be made permanent, health care providers need to prepare for the loss of this financial cushion that regulators had provided. Questions about the costs of treatment and reimbursement levels, combined with expiration of these financial benefits, puts healthcare executives in a difficult position. Healthcare providers need to position themselves ahead of these looming reimbursement changes.
Some of the CFOs I’ve spoken with at healthcare organizations are still trying to determine what the true cost of care is tied to COVID-19. Once those costs are determined, that should give a good idea about what sort of cost efficiencies are needed.
These are a few actions where efficiencies and cash generation can be achieved among healthcare providers:
- Cutting clinical staff is often a short-sighted approach to addressing economic needs, especially if you will need to rehire them when volumes return to normal. Administrative staff could face a harder look if they are not involved in enhancing the patient experience or improving organizational value.
- Modifications in workflow and scheduling can help improve productivity and revenue generation among clinical staff. Patient access systems can help providers better organize their operations to reduce “down time” and also improve patient satisfaction by reducing wait times.
- Revenue cycle management has been an ongoing issue for healthcare providers of all stripes. This is also a workflow issue, but checking a patient’s eligibility for benefits for elective procedures can save a lot of future grief. It also allows patients to know where they stand regarding how much their out-of-pocket costs will be.
- With many roles being moved to work-from-home arrangements, this may be the opportunity to rationalize real estate portfolios. Healthcare providers need to assess their own respective markets and their own needs before disposing of properties to raise cash. A healthcare provider that is leasing sites in distressed real estate market could have considerable bargaining power.
In the longer term, healthcare organizations may need to think of how technology can improve efficiency. Many tasks in healthcare are complex, but the use of robotic process automation can take those tasks and use software to manage them and uncover potential opportunities for new savings. As COVID-19 continues to affect Houston’s healthcare community, we need to position the provider community not only to handle the current environment but also to address the financial consequences during and post-pandemic.