Five financial recovery strategies for physicians and hospitals.

Hospitals and providers: Five post-pandemic strategies

June 11, 2020
Five financial recovery strategies for physicians and hospitals.

Last month, we highlighted how the COVID-19 crisis is affecting payers and health plans, with special attention to their evolving technology needs. Today, we’ll explore how the COVID-19 pandemic is affecting providers financially, as well as some early thoughts on what this post-COVID world looks like for providers’ financial health.

We know provider practices and hospitals have been hit by COVID-19 financially, with unplanned expenses and cancelled procedures that necessitate a complete reconsideration of existing strategies. Hospitals, on the forefront of the pandemic from a patient and preparedness perspective, are without their normal sources of revenue. Some particular challenges include postponed procedures, low emergency room volume and the lack of financial security that smaller hospitals had going into the pandemic:

  • Postponed procedures: Kaufman Hall’s April 2020 report presents several sobering financial facts, including that hospitals’ “median operating EBITDA margins fell more than 100% in March.” With elective procedures postponed, hospitals and specialists have lost major sources of revenue from surgeries, as well as various other inpatient and outpatient procedures.
  • Margin pressures: The financial impacts of COVID-19 for hospitals have accelerated pressures they were already facing. Even before the pandemic hit, hospitals were seeking strategies to deal with a shifting inpatient-outpatient mix, as well as shrinking margins.
  • Particular challenges for small and independent facilities: Challenges are particularly acute for smaller, independent hospitals that often serve as the main source of care in their communities. Smaller—and especially rural—hospitals rely on emergency room visits for revenue, but Kaufman Hall’s April 2020 report showed a 15 percent drop in year-over-year emergency department visits. It’s likely that COVID will hasten the demise of independent, local hospitals even if they hope to avoid joining a larger health system; a Wall Street Journal article from April suggested that in New York, the heart of the pandemic in the U.S., ”independent and smaller hospital systems are being pushed to the financial brink and may soon be unable to make payroll.”

Challenges in the revenue stream for small and independent hospitals

While hospitals spent the last several months moving to manage anticipated COVID-19 patients from a resource capacity and safety perspective to avoid being overwhelmed, primary care practices have grappled with a virtual shutdown of normal operations alongside the pressure to be prepared for COVID-19 patients in their own offices. Their financial challenges include:

  • Volume Declines: As Geneia’s President and CEO Heather Staples Lavoie wrote in her recent blog, restarting routine patient care amid worry over COVID-19 exposure requires patient understanding and engagement; a Commonwealth Fund Study shows a nearly 60 percent decline in patient visits to ambulatory practices between mid-March and mid-April.
  • Investment in Preparations: On top of cancelled appointments, physician practices have been forced to invest in COVID-19 preparedness, falling outside of normal budgets. According to a March survey, nearly half of primary care practices had no capacity to test patients for COVID-19 at that time, and “lack of supplies” was cited as the third-most pressing stressor for respondents.
  • A Rising Number of Uninsured: Even if physician practices are able to move closer to normal patient volume in the near future by making patients feel comfortable, the problem of unemployment looms large. With a growing number of Americans uninsured, some may continue to avoid routine visits. An April study from McKinsey revealed that 10 percent of respondents lost or expected to lose healthcare coverage due to the pandemic.

Given the sheer number of factors affecting financial recovery, what comes next? I suggest the five strategies below will become the tools of a growing number of hospitals and PCP practices in the next phase of COVID-19 recovery:

  • Re-engage: As Geneia has shared before, providers must take steps to ensure their patients are open to resuming in-person care, taking necessary precautions and paying particular attention to whole-person health. While McKinsey suggested in April that nearly 40 percent of respondents would not be willing to return to various sites of care for “more than one month after” the pandemic ends, chronically ill patients across America need attention, and mental health concerns must be addressed soon. One PCP wrote in a Washington Post article that “A second, hidden pandemic will follow COVID-19. The question isn’t so much whether it will happen, but how bad it will be.” The stakes are too high to put off personalized engagement and PCP care, so re-engagement is necessary whether it ends up being virtual or in-person.
  • The power of local: Even with the struggles smaller, rural facilities face in this pandemic, there is an opportunity to emphasize the power of community during this time. Patients who may have overlooked treatment at nearby facilities for larger, better-known tertiary centers may now be looking to stay closer to home as work and social routines have shifted. Hospitals have a chance to be seen as reliable centers of care during this time, driving new patient acquisition and loyalty.
  • Rethink technology investments: Telehealth is clearly an important tool, but other provider technology demands are shifting due to COVID-19. Given the financial struggles imposed by COVID-19, it’s time to make the most of existing investments and gain additional value from analytics. For instance, a digital front door strategy is key to linking technology investments on the backend while getting patients care that meets their specific needs.
  • Get a jump on value-based strategy: Although CMS announced it would not use January-June quality data for program reporting, cost-effective, quality care is more important than ever. Providers should use this time to figure out who needs immediate care following the crisis, using analytics as a prioritization tool that helps them achieve cost, quality and outcome goals.
  • A new era in payer-provider alignment: Payer-provider alignment has long been an important topic for the healthcare industry, but payer-provider alignment is now taking on new, increased relevance given the financial strains caused by COVID-19. In fact, payers have been providing pre-payments to providers, hoping to shore up those offering care. Expect innovative payer-provider approaches to serving high-cost patients and members in the wake of COVID-19.

Without knowing exactly how the pandemic will end, there are still uncertainties around the ultimate financial impact providers will face. In the meantime, I suspect stakeholders—payers, CMS, patients—will work closely with providers to define what a “new” normal looks like in terms of visits, appropriate site of care and use of technology in primary care.