Rochester Business Journal-April 24, 2020
The COVID-19 pandemic is an economic catastrophe for: businesses large and (especially) small, entire industries from airlines and entertainment to restaurants and retail, individuals suddenly unemployed, and families at home with children missing school and many unknowns on the horizon.
There is one reassuring constant for everyone during this financial, emotional and existential maelstrom. Should anyone of us become infected with the coronavirus and need critical care, we have our local hospital standing by with amazing caregivers to inform, care, comfort, and hold the hands of those who are alone.
Hospitals have gone to great lengths to be prepared. They have expanded capacity, adding space, beds, quarantine units, command centers, tents and testing areas. They have added nurses, physicians, clinicians, security and other staff. They have scrambled to acquire now scarce and over-priced personal protective equipment (PPE), ventilators, drugs and supplies. They have canceled all non-emergent, non-essential procedures and services both to clear capacity for COVID patients and preserve precious PPE.
Hospitals are here for everyone in the Greater Rochester, Finger Lakes and Southern Tier regions. But they are also experiencing a financial catastrophe of their own.
All of the actions hospitals have taken to be prepared have been unexpected, expensive and incurred simultaneously as revenue has halted with non-essential elective procedures.
The anticipated massive surge in COVID cases has yet to occur and hopefully we will not see the numbers that deluged downstate providers. For, in addition to sickness, trauma and anguish for community and caregivers, hospitals lose money treating COVID-19 cases.
A study by Strata Decision Technology estimated that, even with a recent 20% increase in payment rates hospitals receive for Medicare COVID patients, they will still lose about $1,200 per case. COVID patients have high acuity and long lengths of stay, use more drugs, equipment, X-rays, scans, and staff utilize loads of PPE as well as expanded cleaning regimens.
Our regional hospitals had little to spare going into this crisis with operating margins averaging 2.4%. Many upstate hospitals are now forced to furlough staff and take other drastic measures to make sure they can keep their doors open during the COVID pandemic and beyond.
Upstate New York hospitals are in financial crisis and urgently need their partners – federal and state governments and private insurers - to rally to their aid.
Federal Aid – Much More Needed
Thankfully, Congress acted to respond to the national emergency. New York Senator Chuck Schumer made sure that significant funding for hospitals, including a $100 billion Public Health and Social Services Emergency Fund, was included in the third COVID relief package Congress passed, the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Rochester region hospitals and those at the epicenter of the pandemic downstate anxiously awaited a critical cash infusion. Instead, the Center for Medicare and Medicaid Services (CMS) distributed the first $30 billion based on a formula that granted New York - the state with by far the most COVID cases - the least amount of money of any state at just $12,000 per COVID patient. New Jersey, also a hotspot, received $18,000. States with few cases like Minnesota and Nebraska received more than $300,000 per COVID patient.
CMS Distribution of $30 Billion of CARES Emergency Funding
PER COVID PATIENT BY STATE: LOWEST HIGHEST
| New York $ 12,000 | West Virginia $ 471,000 |
| New Jersey $ 18,000 | Minnesota $ 380,000 |
| Arizona $ 23,000 | Nebraska $ 379,000 |
| Louisiana $ 26,000 | North Dakota $ 339,000 |
| Connecticut $ 38,000 | Montana $ 315,000 |
| Washington $ 58,000 | Alaska $ 305,000 |
CMS allocated the money based on the provider’s historical share of Medicare fee-for-service revenue, not COVID burden. Not only are hard-hit states like New York disadvantaged, but hospitals that treat a lot of Medicaid, uninsured and Medicare Advantage patients are also short-changed since only Medicare fee-for-service activity was counted.
Medicare Advantage is Medicare’s managed care program. Of all counties in the nation, Monroe County has the second highest percentage of Medicare beneficiaries participating in the Medicare Advantage program at 66.45%. Surrounding counties also have high Medicare Advantage participation. Again, Rochester-area hospitals are disadvantaged. And, although Congress intended for those emergency funds to be for hospitals, doctors, nurses and providers preparing for and responding to the COVID emergency, hospitals received only half of that first $30 billion.
CMS said it used that simple formula to get money out the door quickly. The agency has pledged to rectify inequities when the remaining $70 billion is distributed. Sens. Schumer and Kirsten Gillibrand and 25 of New York’s 26 representatives wrote to Health and Human Services Secretary Alex Azar and CMS Administrator Seema Verma insisting that CMS quickly allocate the remaining money according to congressional intent – helping providers in hardest hit states and in greatest need due to COVID.
Senator Schumer is again leading the charge to secure additional substantial federal aid in future legislative packages for New York’s struggling hospitals. Much more will be needed.
Private Insurers Are Missing
All partners in the health care community have joined the collective COVID battle except one. Despite urgent requests from hospital CEOs, private insurers across New York State have refused to pitch in to help hospitals respond to the emergency.
Private insurers have plenty of cash since they continue to collect premiums while paying few claims since procedures are canceled.
Recently Pandion joined hospital associations across the state asking Gov. Andrew Cuomo to direct insurers to help hospital with cash flow by immediately paying outstanding bills owed to hospitals, advancing periodic payments on future claims, and ending administrative reviews and denials.
We hope private insurers, whether by magnanimity or mandate, join hospitals, their staff, caregivers, and our communities in the COVID fight soon.
State Medicaid Cuts Await Hospitals After the Emergency Passes!
The hospital community has valued Governor Cuomo’s outstanding leadership throughout the emergency. He has worked relentlessly to contain the virus, protect New Yorkers, and ensure hospitals, doctors and nurses have what they need to care for patients. Hospitals look forward to partnering with the Governor and his administration on the “restart” of life in general and the health care system.
Hospitals are developing thoughtful, cautious, measured plans, working with the Governor and Department of Health, to gradually resume routine medical appointments and elective procedures when the time is right. Testing will be critical. New precautions and processes will be established to protect patients and staff from COVID. Capital investment will be needed to create separate spaces, treatment areas and entrances.
Patients will gradually return. There will be pent up need, but it is likely that many will still fear COVID and be reluctant to enter the health system. Countless will have lost their health insurance along with their jobs. Hospitals will care for more uninsured.
Like with so many businesses, the road back from near financial ruin to stability will be long and difficult, especially for upstate New York hospitals. Incredibly, there are additional looming financial calamities hovering on the horizon in the form of state funding cuts.
In January (pre-COVID), the state faced a $6 billion deficit, of which $4 billion was attributed to the Medicaid program. To fill the budget hole, Gov. Cuomo appointed a Medicaid Redesign Team II charged with finding $2.5 billion in Medicaid savings before the April 1 start of the next state fiscal year 2021 (SFY21).
Over the ensuing weeks, COVID erupted and the health care system was stressed as never before. On March 19, the MRT II proposed $2.5 billion in Medicaid spending reductions as mandated by the Governor. The legislature included the cuts in the state budget but delayed them until after the public health emergency, at which time the Governor will have the discretion to implement them. Per the budget, state hospital reimbursement would be reduced by $314 million which means more than $600 million in hospital cuts when combined with the lost federal Medicaid match. These cuts will fill state budget deficits that existed before the COVID emergency.
Now the Governor is calling on the federal government to provide substantial funding for states to help them manage unprecedented costs incurred because of the COVID crisis. It is far from certain whether Congress will provide states with money or enough money. If Congress acts, New York must count on appropriate distribution of funds to states that need it most. That money will be needed to fill the giant new hole in the state budget created by massive COVID expenditures combined with a dramatic loss of state revenue resulting from the economic downturn.
During his press conference on April 20, Gov. Cuomo announced that if the federal government does not provide states with significant funding, New York will have no choice but to cut education, local government and hospitals by 20% each. The governor said the state cannot spend money it does not have. Unlike the federal government, New York must balance its budget per the state constitution and adjust spending to align with revenue. The state could begin making these reductions as early as June 1.
Just when hospitals, weakened as never before, are struggling to care for COVID patients, recover and rebuild. We would like to think and can only hope that the federal government will respond with funding and, if it does not, the Governor reconsiders.