$100 billion in HHS provider relief funding falls short in reimbursing healthcare organizations for COVID-19 patient care

• The U.S. Department of Health and Human Services on April 10 released the details of how it would distribute the first “tranche” ($30 billion out of $100 billion to the Public Health and Social Services Emergency Fund).
• The HHS website notes the next tranche of funding will be focused on providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population and providers requesting reimbursement for the treatment of uninsured Americans.
• Although $100 billion is a lot of money, it’s not enough by a long shot, according to HFMA’s Chad Mulvany.

After two weeks of frantic speculating by providers, the U.S. Department of Health and Human Services (HHS) released on April 10 the details of how it would distribute the first “tranche” ($30 billion out of $100 billion allocated to the Public Health and Social Services Emergency Fund).

The initial round will go to hospitals and physician practices based on their Medicare payments for 2019. CMS will take each hospital’s or physician practice’s revenue and divide it by $484 billion (total Medicare physician and hospital payments for 2019) and multiply that ratio by $30 billion. So a hospital with $48 million in Medicare revenue is receiving approximately $3 million ($48m/$484B*30B) in relief funding. Recipients of the funds may not balance bill patients for COVID-19 treatment.

The HHS website notes the next tranche of funding will be focused on:

• Providers in areas particularly impacted by the COVID-19 outbreak
• Rural providers
• Providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population
• Providers requesting reimbursement for the treatment of uninsured Americans

Takeaway

Although $100 billion is a lot of money, it’s not enough by a long shot. Analysts at J.P. Morgan project the initial $100 billion appropriation will cover approximately two months of lost revenue for hospitals. Unfortunately, this is insufficient as these funds will also, rightly, be used to offset revenue losses related to COVID-19 for other provider types, and provide coverage for those who are uninsured and require treatment for COVID-19. Depending on the duration of time CMS’s guidance to cancel elective procedures remains in place, we estimate that hospitals alone will lose between $125 billion and $150 billion in revenue, according to HFMA Analysis assuming CMS guidance on elective procedures remains in place between 2 ½ to three months.

Additionally, given the significant increase in expenses required to care for COVID-19 patients, it’s estimated that hospitals will lose approximately $1,200 per case. This analysis includes the 20% increase in Medicare payments for inpatient discharges related to COVID-19. Epidemiologists at Harvard have projected that as many as 20 ½  million Americans could be hospitalized during the course of the pandemic, which would result in a loss to hospitals of $24.6 billion (HFMA Analysis based on projected number of cases and estimated loss per case).

Reimbursing hospitals alone for lost revenue and patient care expenses related to COVID-19 will require at least between $150 billion to $175 billion. That’s to say nothing of covering lost revenue and expenses for other providers or paying for COVID-19 treatment for the uninsured. Therefore the initial appropriation of $100 billion is insufficient to provide the necessary financial stability to hospitals, physicians, other providers and uninsured Americans stricken with COVID-19.

HFMA is particularly concerned about rural hospitals given the recently updated data. Over the past 10 years, 120 rural health-care centers have closed. According to recent analysis by Guidehouse, which was conducted using financial results prior to the COVID-19 pandemic, more than 350 rural hospitals across 40 states are at risk of closing. Those hospitals represent: more than 222,350 annual discharges, 51,800 employees and $8.3 billion in total patient revenue.  

The good news is: The Hill reports that some in Congress are interested in including “another $100 billion for hospitals and healthcare centers, $150 billion for state and local governments, and a 15% funding increase for the Supplemental Nutrition Assistance Program (SNAP) that provides food stamps.” While a $100 billion is better than nothing based on our preliminary analysis, that number needs to be at least $200 billion (and probably more as we are constantly refine our numbers) to bring the combined appropriation to provide relief to hospitals, physicians and other providers to at least $300 billion to offset the impact of COVID-19 in the near-term.