From volume fluctuations to reimbursement questions, providers stand in a maze of financial unknowns as the nation enters the post-pandemic recovery.
Loss of employment is shifting the payer mix from commercial plans to more uninsured or underinsured patients, and even as elective procedures resume, an uptick in patient volume is unlikely to happen right away or across all health services evenly. Especially in the COVID-19 hot spots, patients may be reluctant to walk into a healthcare facility or practice unless they absolutely need to.
As providers outline a roadmap for revenue recovery, there are several factors adding an additional layer of complexity to their forecasting efforts. Understanding these realities will be integral to setting financial projections, assessing opportunities in value-based care models and accelerating margin improvement.
Patient Revenue and Volume
Volume and average reimbursement will both likely decline in the short term compared to pre-COVID-19. The volume that comes back will reflect a less commercial payer mix, and these changes are expected to have a negative impact on revenue for many providers. Along with that, the specific amounts due for the services will shift.
A few factors that will likely put downward pressure on overall revenue and volumes include:
- The continuing transition of high-volume inpatient procedures, including orthopedic and cardiac surgeries, to outpatient and ambulatory care settings. This trend was in process pre-pandemic and is likely to accelerate as patients seek care outside of the hospital setting in the near term.
- Changing labor and delivery preferences. Reports suggest there has been an uptick in demand for midwives during the pandemic, as more women are considering giving birth at home or in birthing centers instead of the hospital.
- Increased complexities with surgeries. Some surgeries that may have been considered routine two months ago may have developed into more complex cases. Surgical cases as a whole may require more patient preparation and lead time, including COVID-19 testing, and changes in acuity could affect care delivery as well as cost to the provider.
Centers for Medicare & Medicaid Services (CMS) Activity
CMS is trying to support hospitals providing care to COVID-19 Medicare patients though the implementation of a 20 percent increase on their CMS MS-DRG weight, which will translate into higher reimbursement. Unfortunately, this might not cover the cost of these COVID-19 patients, while at the same time other payers, such as commercial third-party administrators (who in most cases don’t have access to additional funding sources) are not providing a similar increase.
Eventually, at least some of these waivers and additional funds will end. This could be unfavorable in areas such as telehealth, where providers have made significant investments in recent weeks, but may turn into potential bright spots as advocates push for CMS and Congress to continue such initiatives. Recent experience may also prompt more employer-sponsored health plans to include telemedicine as a covered benefit, as a means to increase access to care and limit exposure to additional contagions in physicians’ offices.
Additional CMS support is being given to providers participating in the CMS Comprehensive Care for Joint Replacement (CJR) bundled payment program. These participants will not be at risk for individual episodes that have negative savings for a specific period. As of the time of this writing, CMS hasn’t yet clarified how episodes in the Bundled Payment for Care Improvement Advanced (BPCI-A) or Oncology Care Model (OCM) will be handled.
Similarly, CMS has provided support to providers in the Medicare Shared Savings Program (MSSP). As recommended by Premier, CMS extended agreement periods for accountable care organizations (ACOs), removed COVID-19 episodes from ACOs’ expenditures and reduced losses incurred as a result of the public health emergency. However, CMS has not announced similar relief for other models such as the Next Generation ACO and Comprehensive Primary Care Plus. In meetings with Premier, CMS has acknowledged the need for a fix for the Medicare ACOs and to protect participants who have already moved into downside risk. The complexity will come in not mistakenly rewarding organizations that have done little to control utilization but merely benefitted from a delay in elective cases and reduction of services.
Expenses, Cost Drivers and Price Fluctuations
COVID-19 made spaghetti out of the industry’s traditional supply and demand charts. As elective cases start to ramp back up, there may continue to be issues with availability and pricing for supplies that will be in high demand, as well as cash flow issues.
Many providers have applied to Medicare Accelerated and Advance Payment Programs. This cash infusion has supported providers through hard times, but as with any loan, paying these funds back along with interest may create future cash flow concerns. Premier is advocating for improvements to the program that do not exacerbate providers’ cash flow issues once the payment period begins.
Going forward, ensuring access to protective equipment, diagnostics and other supplies may come with higher short-term costs. Premier data shows that drugs for treating COVID-19 have been a significant area of concern in terms of availability and pricing. Most recently, drugs that treat comorbid conditions – such as cardiac issues and blood clots – are showing signs of shortage risk and may also be susceptible to price fluctuations.
To counterbalance these market dynamics, providers should continue to thoughtfully and strategically resource their supplies, including working with trusted purchasing partners, considering programs that invest in stateside manufacturing of goods and using technology that predicts supply needs.
Participation in Value-Based Care Models
Health systems have different levels of engagement with value-based care models. Some may have no engagement, while others are embedded within ACOs or in downside-risk arrangements. Savings or potential losses from an ACO or bundled payment could offer an alternative revenue stream that does not flow through traditional payer contracts or systems with government payers. As part of their post-COVID recovery efforts, providers should consider how payments associated with value-based care models, and proactive management of these models, will affect margin trajectories, particularly as participation in value-based care is expected to grow post-pandemic.
View to the Future
Expect a new normal, which for many providers will not reflect the “old days” of just a short time ago. In terms of the financial picture ahead, volume, both elective and overall, will ramp back up over many months. Some providers will look at risk-based arrangements to protect future revenue, including capitation and other innovative arrangements.
Going forward, there’s no doubt that a stronger alignment will be needed between the health system and the employed and community physicians around cost and efficiency, with a common goal of reducing unwarranted variation. Providers will want to explore financial mechanisms and incentives that can help solidify this alignment, such as expanded use of the Hospital Quality and Efficiency Program to improve quality and reduce costs across the system.
The reimbursement mix will continue to be a challenge until the economy nears full recovery, and supply availability and costs for elective cases may become the most pressing issues. Most importantly, providers need to ensure the safety and wellbeing of their people and patients, and that won’t be free.
Whether you find yourself in the pre-COVID-19 peak, are mid-peak or recovering after a surge, there are actions your organization can implement to be better positioned for financial recovery and to jump-start models that protect future revenue.
During and beyond COVID-19, Premier continues to act as a trusted connection point across the industry. Our commitment is to continue sharing key insights, developing and spreading best practices, and partnering with our members so they are enabled to improve the health of their communities. Learn more.