CARES Act No Match for Drastic Decline in Outpatient Net Revenue

By Brian B. Sanderson
| 4/14/2020
CARES Act No Match for Drastic Decline in Outpatient Net Revenue

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is aimed at providing relief for individuals and businesses that have been negatively affected by the coronavirus pandemic. The legislation contains many aspects and recipient categories, with healthcare being a major beneficiary.

Although the CARES Act provides much-needed relief for our nation’s healthcare systems, this assistance might not be sufficient to cover the following:

  • Significant reductions in patient volume and net revenue. Based on outpatient volume and revenue data for March 11-25, 2020, Crowe projects a $500 million per day decline in outpatient net revenue for hospitals on a national basis.1
  • Unclear patient volumes during April. With most elective procedures being postponed during the pandemic, the intensity of care and resulting reimbursement are not expected to match the traditional medical/surgical mix.
  • Additional expenses related to aggressive preparation. Challenging situations – involving both labor (at-risk clinicians and patient-facing administrative personnel) and nonlabor (insufficient access to needed supplies) – create daily hardships for hospital operations leaders.
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Despite the CARES Act, the near-term financial outlook of U.S. hospitals is not positive – and health systems might require additional support over the next quarter. Following is a summary interpretation of the act as it relates to hospitals and veterans’ healthcare.

The stimulus package provides approximately $117 billion for hospitals and veterans’ healthcare. Provisions include:

  • A $100 billion ($65 billion to hospitals; $35 billion to doctors, nurses, suppliers, and others) public health and social emergency fund (grants) to reimburse providers for expenses and lost revenues related to the coronavirus pandemic (that is, delaying elective surgeries and other procedures to focus on the outbreak). The money can be used for protective gear, testing supplies, emergency operations centers, and other essential supplies or equipment.
  • Increased funding for:
    • Community health centers.
    • Medicare and Medicaid.
    • Treatment of Medicare patients with the coronavirus – 20% increase in reimbursements; Medicare diagnosis-related group add-on applied to patients treated at inpatient prospective payment system hospitals.
  • Temporary removal of the 2% Medicare sequestration adjustment from May 1 through Dec. 31, 2020.
  • Elimination of $8 billion in scheduled Medicaid disproportionate share hospital payment reductions.
  • Advances for hospitals on future Medicare payments:
    • The amount of interim payments most hospitals could receive based on prior payments is increased to 100% (from 70%).
    • Critical access hospitals are eligible for up to 125%.
    • Hospitals have four months until recoupment and one year or longer before repayment.
    • Post-acute care providers have the flexibility to increase capacity without penalties during the emergency period.
    • The 50% rule for long-term care hospitals and the site-neutral payment policy are waived.
    • The three-hour rule for inpatient rehab facilities is waived.
  • Payment for telehealth and home services is expanded for the following providers:
    • Federally qualified health centers.
    • Rehab care centers.
    • Long-term care organizations.
  • For-profit and not-for-profit hospitals with fewer than 500 employees are eligible for up to $10 million in emergency loans to pay for salaries, healthcare, and other employee-related expenses and benefits that could be forgiven if no layoffs occur during the emergency period.

1 According to data gathered by the Crowe Revenue Cycle Analytics solution, which captures every patient financial transaction in more than 1,200 hospitals and thousands of physicians’ offices nationwide.

The Crowe Revenue Cycle Analytics (Crowe RCA) solution was invented by Derek Bang of Crowe. The Crowe RCA solution is covered by U.S. Patent number 8,301,519.

Want more insights on addressing coronavirus-related challenges?
Go to the Crowe COVID-19 resource center for more analysis and updates.

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Brian B. Sanderson
Managing Principal, Healthcare Services