Toyon’s COVID-19 Healthcare Leadership Forum Insights

In early May, Toyon Associates, Inc. hosted a group of industry leaders from hospitals and healthcare systems across the country to discuss current and anticipated funding requirements from the Department of Health & Human Services (HHS) COVID-19 emergency funding.  Please find below a summary of the key notes and insights provided during the discussion.

I. Significant COVID-19 Challenges

1. Revenue losses, specifically from decline in patients and elective procedures stopping (doctors are especially impacted from the decline in elective procedures). • Health systems reported volume decreases of 80%. Prospectively, it is difficult estimating future volumes of patients. • The surge of current COVID-19 patients appears to be in certain areas of the country, but not in many other areas. These providers are dealing with the harsh financial hits related to patient declines, etc. • Some health systems reported furloughing staff and enforcing PTO.

2. Advanced payments are helping, but providers are concerned about ability of these payment recoupments this fall.
     • One provider noted they were working with the MAC to receive PIP and outlier payments.

3. Multi-state providers noted they will be affected differently depending on when states open up from stay at home mandates, etc.

4. Supply shortages, as providers are concerned about PPE. Providers are relying on supply chain management systems to evaluate their PPE.

5. Telehealth increase, providers reporting increases from 100 to 6,000 per day in telehealth encounters with many constant challenges. Also, providers reported Ambulatory surgery centers being closed, converted to video only visits.

6. Post-acute patients, as providers reported patients ready to be discharged to post-acute providers (i.e., SNF), however SNFs will not accept patients from acute care hospitals. The patient is not ready to go home, so hospitals have to keep them in house.

7. Process coordination, as more effort spent ensuring hospital teams are coordinated in provider implemented response processes.

8. Teamwork while working from home was reported as challenging by a number of providers. There was interest from the group on achieving productivity levels, especially for employees not accustomed to working from home. On-boarding new employees was noted a new issue.

II. COVID-19 Funding

1. HHS funding specifics were noted as overall challenging to follow.

2. Advanced payments are difficult in determining the split of provider (Part A) vs. professional (Part B) funding.

3. Retention of funding is considered primarily related to the quantification of lost revenue.

4. FEMA funding balanced with other grants is anticipated to be a challenge.

5. Managed care advanced payments were discussed as potential revenue stream. However, in large part managed care plans are not currently allocating advanced payments.

6. Second tranche of general CARES funds was less than expected for some hospitals.
     • This is due to the first allocation going out using Medicare revenue as the basis for funding.
     • Providers are not receiving more than 2% of net patient service revenue as funding from the $50bn general fund.
     • Concerns over potential recoupment of funds were noted on call and one person noted the Secretary mentioned funds could be recouped on a national provider call. Others noted they are not concerned about recoupment due to HHS language stating this money is not a loan.

7. Preparation for HHS requests was noted as important. During the request for beds and cases, providers reported a scramble to locate who at the hospital(s) received the HHS email and has access to the portal.

8. The provider relief portal requires 2018 information based on Tax Return data. It was noted that once this data is provided, it may affect funding and distributions. One provider noted there is speculation the tax information could result in more funding for outliers. Providers noted funds from “tranche 2” require information from IRS 990, however 990s do not align up to individual hospital amounts for many health systems.

9. Hundreds of tax IDs are being assembled by health systems for purposes of receiving/tracking funding amounts. Tax IDs can be regional, and some hospitals may have more than one tax ID. Providers are also challenged with decentralized PECOs, PTANs, and NPIs. The IDs are all needed for varying portions of the funding.

10. Interacting with HHS/OPTUM submissions requires the user to be very specific (i.e., the hospital’s payment needs to tie down to the penny). If the user does not enter in correctly, the system errors out.

11. Hospitals under previous ownership may have the funding sent to the prior owner by HHS. It was reported this may occur when prior owner billed Medicare during ownership transition.

12. Field hospital discharges were discussed as using code 69 (discharge for disaster) for discharges from field hospital.

III. COVID-19 Terms Conditions (T&Cs) and Attestation

1. Deal-breaking T&C language is being requested by hospital counsel from finance leadership. Perspective from finance is to ensure fair recognition of revenue losses and comprehension of HHS funding methodologies.

2. Out of network patients are noted as risks in inadvertently violating T&Cs. To account for this, providers noted
     • Holding patient bills;
     • Pro-actively writing-off patient copayments as underpayments; and/or
     • Applying new codes to track these patients and transaction/payment types.

3. T&Cs require quarterly reports (due 10 days after close of the quarter) and are anticipated to start with the July 1st quarter. Concerns were raised about consequences of missing the July quarterly report and providers are waiting further instructions from HHS.

4. Attesting second payments requires attesting first payments.

5. Partial attestations for individual hospital units do not appear to be an available option. Attestation is all or nothing for funding amounts.

IV. Tracking Revenue Loss and COVID-19 Expenses

1. Revenue loss amounts to HHS, including quarterly reports, have providers estimating revenue losses by assessing the following information for the July quarterly report:
     • Budget to Actual using budgeted revenue during March and April compared to the same actual period had COVID-19 not appeared.
    • Year over year comparisons using actual revenue received during March and April compared to same period last year.
     • Hybrid methods best suited for the respective hospital(s). For instance, under a hybrid methodology, providers noted:
          o Different estimates depending on the region of their hospital(s);
          o Assessing historical data/trends, against unique activity for 2020 increasing costs. For instance, consideration of what was purchased, and “ramped-up” as a result of COVID-19.
          o Insurance recoveries as factors that may be applied as a factor revenue loss estimation.
          o Tracking additional staffing. For instance, med/surg now has more staff then typical.
          o Other unique circumstances, such as cost of retaining patients (i.e., SNF) ready to be discharged to post-acute care, but still at the hospital.
     • Ultimately, providers reported looking for something that can be proven out, audited, and well substantiated.

2. New departments are being created to track expenses and revenue. The new COVID-19 departments include:
     • Costs such as labor and materials, PPE and alternative care sites. The group discussed allocating costs associated with overhead related to COVID-19 expenses. One provider noted about 95% of time in the past month was related to COVID-19 related activity.
     • Modified payroll systems to track COVID-19 pay categories and salaries. This effort helps understand the time and resources allocated to COVID-19 time and patients.
     • Systems to track funding across health-system services.
     • Some providers are reporting information from these departments to their respective State(s) on a daily basis.
     • It was discussed the use of a payor code or transaction code may be useful regarding patients for the HRSA uninsured program and WS S-10 uncompensated care reporting.

3. New department challenges include:
     • The extension of existing departments, like the emergency department.
     • PPE reporting, allocations and price mark up.
          o PPE may be currently sitting on the balance sheet, as it has not been used.
          o PPE will be allocated to disaster response and providers are placing strict guidelines around what can be coded as PPE in these departments.
          o Providers need to consider PPE like face masks that are purchased for surgery – but related to COVID-19 patients.
     ▪ The group discussed that if PPE is purchased in bulk, it may be attributed to disaster response. The definition of patient care vs. disaster recovery is a separate issue.

4. Previous emergencies, such as earthquakes have provided some insight on funding and revenue loss recording to certain providers with this experience.

5. Tracking FEMA revenue with other grants is anticipated to be challenging and it is hopeful the assignment of revenue and costs to these departments will be helpful.

6. Different funding sources are elements providers are looking to tie into new departments, which may be different depending on the state for systems spanning across multiple states and regions. Costs/revenue from varying sources are eligible for different funding programs. Providers need a comprehensive tracking method.

Toyon Associates greatly values and appreciates the input provided by our industry friends and colleagues around emerging issues like COVID-19.  If you have any additional questions regarding the topics discussed above, please feel free to contact robert.howey@toyonassociates.com.

We also look forward to conducting more leadership forums around current issues affecting our industry in the future.  Thank you.

Toyon Associates Healthcare Finance

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