Following the onset of COVID-19, hospitals, and healthcare systems have endured a significant decline in profits and income. Since the current administration’s National Emergency declaration on March 13, 2020, various health experts and agencies, including the Surgeon General of The United States, the Centers for Medicare & Medicaid Services (CMS), the Centers for Disease Control and Prevention (CDC), and the American College of Surgeons (ACS) suggested that U.S. hospitals delay or cancel all elective, non-essential medical, surgical, and dental procedures to make room for an excess of COVID-19 patients. COVID-19 patients, whose reimbursements often come from Medicare and Medicaid, are frequently lower in commercial rate than elective procedures, further decreasing revenue.

A loss in revenue

According to the Medical Group Management Association’s (MGMA) COVID-19 Financial Impact on Medical Practices report, in April 2020, 97% of medical practices reported that they encountered an adverse financial impact related to COVID-19. In addition, medical practices reported a 55% decrease in revenue and a 60% decrease in in-patient capacity due to social distancing restrictions, sheltering in place, and non-essential business closures. Physicians and practices experiencing the most significant impact were those whose compensation relied heavily on productivity (a volume-driven revenue model). 

As most healthcare systems rely on fee-for-service reimbursement and productivity compensation models (who were once known as predictable and safe), no one planned for a pandemic to seize 30-50% of patient volume for an extended period.  

Telehealth flexibilities

One saving grace has been the HHS Office for Civil Rights’ (OCR) institution of telehealth flexibilities that allows for HIPAA-covered health care providers to provide telehealth services to patients using remote communication technologies, such as FaceTime, Facebook Messenger, Google Hangouts, Zoom, or Skype – for telehealth services, even if the application does not fully comply with HIPAA rules. Thanks to telemedicine, patients can feel safe and secure from the comfort of their own home or office, and physicians can charge their hourly fees for services rendered.

As we near 2021, practices are starting to reopen and are gradually returning to regular business operations. With the enduring pandemic, some patients remain skeptical about in-person care. For those skeptics, telehealth services are still being offered by many practices. However, most likely, they won’t carry practices for the long haul, especially if those practices rely steadily on elective procedures and in-office lab testing for revenue. 

CARES Act Provider Relief Fund

On April 10, HHS announced the immediate disbursement of the first $30 billion of the $100 billion that Congress allocated to hospitals, physicians, and other health care providers in the Provider Relief Fund.

Qualified healthcare providers, services, and support may receive Provider Relief Fund payments for healthcare-related expenses or lost revenue due to COVID-19. Individually, the COVID-19 Uninsured Program reimburses providers for testing and treating uninsured individuals with COVID-19.

Under the CARES Act, the distributions are not loans but grants that will not need to be repaid to the US government, assuming providers comply with the terms and conditions. Furthermore, the HHS recently announced phase three of Provider Relief Funding. For eligible physicians, the new phase three general distribution is designed to disburse the balance of an amount equal to 2% of annual pre-COVID-19 revenue from patient care for all applicants. Some applicants may be eligible for an additional payment to account for revenue losses and expenses attributable to COVID-19. 

What lies ahead 

While it’s hard to predict the impact COVID-19 will have on our health care system, we know that services, such as telehealth in medical offices and hospitals, plus aid from the CARES Act, are both providing physicians with much-needed help throughout this difficult time. As with any extreme event, it’s expected that health care systems will work collectively to hammer out physician compensation agreements to prepare for any future situations similar to COVID-19.