Rich Bajner and Tim Kinney, HFMA
Hospital and health system financial performance has been devastated by the blindside hit from the COVID-19 pandemic. Recovery from the unexpected disappearance of hundreds of billions of dollars in patient care revenue in just a few short months will require both operating discipline and a dynamic approach to budgeting and managing payer relationships. It is imperative that organizations begin now to prepare for the ultimate financial impacts of the pandemic.
Beware the COVID-19 backlash
COVID-19 has resulted in perhaps $2 trillion in activity disappearing from a $21 trillion U.S. economy, more akin to a flash depression than a recession. The U.S. Department of Labor reported on Sept. 17 that, as of the end of August, more than 27 million people were receiving unemployment. And in July, the Urban Institute issued the following preliminary estimates for the more than 10 million workers who lost healthcare coverage with their jobs.
The actual uptake rates for Medicaid and exchange enrollment and the extent of growth in uncompensated care will depend on the severity of each state’s downturn.
Key components of an effective strategy for health systems
It seems clear that a post-COVID-19 health financing backlash is already upon us, requiring action by hospitals and health systems. Here are four key components of an effective strategy for dealing with financial uncertainty that health systems should implement.
Beyond COVID-19: Preparing for price transparency’s impact on payment rates and collections
Hospitals and health systems must also prepare for the new federal price transparency regulations, effective Jan. 1, 2021, which will exert pressure both on consumer payments and on payer negotiations. Providers with high contract rates relative to market will need to justify their rates by promoting the value of the care, medical education and community service those rates help fund.
Other actions hospitals and health systems must undertake to ensure profitability in the wake of transparency include:
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