Six Strategies to Navigate COVID-19 Financial Recovery for Health Systems

This article is based on awebinarby Dan Unger, Senior Vice President and General Manager of Financial Transformation Business at Health Catalyst, titled,“COVID-19 Financial Recovery: The Effects of Shifting to Virtual Care.”

According to asurveyfrom the American Hospital Association forecasting healthcare performance through 2020, inpatient volumes will be down 19 percent and outpatient volumes by 34 percent. Meanwhile, COVID-19 will continue pushing increases in personal protective equipment (PPE) expenses. Together, dropping volumes and escalating costs translate to 2020 projected industry losses of $323 billion.

Federal provider relief funding (e.g., theCARES Act) offers assistance to healthcare organizations. However, while a vital phase of financial recovery for health systems, federal relief will only cover about 50 to 60 percent of health system losses. To regain financial stability, organizations must move through additional recovery phases that will not only help them return to pre-pandemic financial health but also support sustainable, profitable models in the industry’s new normal. Significantly, changes in care delivery options, namely from brick-and-mortar office visits to virtual care options (e.g.,telehealth), stand to impact financial recovery by reshaping care models and reimbursement.

The Four Phases of COVID-19 Financial Recovery for Health Systems

While individual organizations face unique challenges, collective experience of COVID-19 impact and pre-pandemic financial health suggests four phases of financial recovery for health systems:

Phase #1: Receive and Account for Stimulus Funding

Healthcare industry financial strain become a national concern early in the course of the 2020 pandemic, prompting Congress to respond with$100 billion in relieffor hospitals and other healthcare providers. Receiving and accounting for these stimulus funds (including understanding the terms and conditions around qualifying expenditures, risks, and compliance requirements) is the first phase of financial recovery for most organizations. However, as stated above, Congress’s welcome relief funding only covers a portion of the projected industry losses in 2020, making the next three phases of financial recovery at least as vital as the first.

Phase #2: Recover Revenue and Accelerate Cash

A starting point to recover revenue and accelerate cash is resuming elective surgeries and ambulatory visits, which organizations paused or slowed during the acute phases of COVID-19. These types of non-emergent care are significant sources of revenue for some provider groups or large integrated delivery networks (IDNs), as well as a vehicle for needed patient care.

After restarting paused operations, the next step of phase two is to capture revenue and accelerate cash. Organizations can achieve both through revenue cycle processes such as collecting on outstanding high-dollar accounts, entering charges, and resolving discharged not final billed (DNFB) cases. In short, providers need to get owed cash in the door as quickly as possible.

Phase #3: Reinvesting in Long-Term Core Capabilities

由于未来可能减少数量和收入，卫生系统必须了解和管理其成本。To do so, many health systems will need to invest in key systems and processes:

• To support cost understanding and management, organizations need an activity-based costing solution, such as the Health Catalyst CORUS® Suite, that delivers detailed and actionable cost data across the analytics environment.
• To regain and sustain organizational well-being, health systems need real-time patient safety and population surveillance (e.g., the Health Catalyst Patient Safety Monitor™), as some projections put the COVID-19 outbreak at another year or so.
• 未来可能会发生更多像COVID-19这样的事件，这使得识别和快速应对激增的能力至关重要。能力规划工具(如“健康催化剂- COVID-19能力规划工具”)将有助世界杯葡萄牙vs加纳即时走地于各组织在未来发生紧急情况时防止重复关闭。

Phase #4: Reinventing Care Delivering Operations

The abrupt drop in patient volume and shift to virtual care makes reinventing health system operations and care delivery mission critical. Before March 2020, Medicare beneficiaries rarely used telehealth. From mid-March to mid-June, however, 38 percent of all Medicare beneficiaries who had an evaluation and management (E/M) visit did so via telehealth (Figure 1). While Medicare is just one portion of the market, this data is part of the trend towards a meaningful increase in virtual care adoption. Telehealth providerTeledoc, for example, reported100 percent growthin visits from Q1 in 2020 over 2019, with a significant portion of that growth just from the increase in March.

The Shift to Telehealth and Its Financial Considerations

As the rapid growth shows, COVID-19 has pushed a lot of providers to hastily adopt telehealth with little time to prepare and understand the long-term financial implications. While remote care has offered a short-term means of engaging patients with needed care and regaining revenue for non-emergent care, the bigger-picture financial impacts are less straightforward. Healthcare organizations have much to consider as they progress with remote-centric practices.

Pre-COVID-19 Financial Challenges for Primary Care

In general, healthcare organizations today lose around $150,000 per primary care provider (PCP), with only the 90^thpercentile and above breaking even on primary care (Figure 2). As such, employed physician groups are already challenged financially, without the impacts of COVID-19.

Adapting to the New Competitive Landscape

With the sudden shift to telehealth, already financially strained providers have entered a new business landscape, as COVID-19 has broken down the competitive barriers between traditional providers and more modern telehealth and disruptive care delivery companies. There’s a lot of movement looking to take traditional providers’ business, and these newcomers are often operating beyond the confines (rules and regulations) of traditional healthcare.

Healthcare’s new competitors fall into three main buckets:

1. Telehealth-Only Providers:MDLIVE, Teladoc,Doctor On Demand, and existing companies are gaining traction. They use real physicians, not just mid-levels, offer a variety of specialties, and more. Teladoc and Doctor On Demandfocusa lot of their business on working with insurance providers and self-funded health plans to provide subscriptions.
2. Direct Primary Care: The direct primary care companies includeGo Forward,Crossover Health, andOne Medical. The innovative Go Forward is similar to more modern subscription concierge practice. Crossover Health partners with employers like Apple, Microsoft, and most recently Amazon, to deliver care directly to their employees. The large One Medical (public as of 2020) operates more traditionally than its direct primary care counterparts as a more modern concierge practice (they charge an annual fee and just bill fee for service).
3. Large Corporations:亚马逊(Amazon)、沃尔玛(Walmart)和CVS健康(CVS Health)等公司正在进入医疗保健领域。Amazon announced theirvirtual care programin fall 2019 for their employees in the Seattle, as well as in-home deliveries and more. The company also announced the partnership withCrossover Healthin July 2020 to pilot employee health clinics near some of its large centers. Meanwhile, Walmart has opened up care clinics and a virtual care system, and CVS Health continues to build out their hubs.

Teladoc、Doctor On Demand、Go Forward和Crossover Health打破了医疗保健的常规规则和规定，它们的商业模式忽略了编码、CPT编码、修饰符以及传统组织必须遵循的其他程序。另一方面，亚马逊(Amazon)、沃尔玛(Walmart)和CVS则采用传统的直接定价方式，这一点值得关注。重要的是要记住，这些公司是大型雇主——商业支付者，他们正在将医疗服务从传统系统转向他们自己的医疗服务系统。

Competing for Clinicians

As large corporations and other new providers ramp up competition for patients, they’ll also compete with traditional organizations for clinicians. With burnout and job dissatisfaction rising, the perks and benefits of these modern companies pose a threat to health systems. According to an industrysurvey在美国，79%的pcp患者都有过倦怠的症状。与此同时，五分之四的受雇医生表示，他们的医疗系统雇主没有采取任何措施来对抗这种疾病。由于临床医生推动收入，失去他们将影响收入。

这些颠覆性的护理递送公司正在引入新的护理模式，对临床医生有很大的吸引力。新的模型提供了更少的麻烦，没有编码和文档的质量衡量等。由于患者数量较少，压力通常较小，而且有大量的礼宾服务，甚至远程医疗，临床医生可以在一定程度上选择他们想要的数量，以及更多的灵活性。

The Unlikelihood of Reimbursement Parity

As well as disrupting healthcare delivery models, telehealth also stands to impact healthcare revenue. Clinicians have historically named lower reimbursement as the number onebarrier to telehealth. With CMS declaring they’ll pay telehealth in parity for the duration of COVID-19 health emergency, it’s tempting to consider the reimbursement barrier resolved.

然而，长期补偿平价可能不现实。CMS通常支付远程医疗费用的80%，因此，如果一个组织继续向其临床医生支付与虚拟代码相关的RVU工作，它将减少15个百分点的利润。如果机构让临床医生坐在诊所里进行一些虚拟访问，他们的利润就会降低，收入也会降低，但却维持了运营费用。

正如上文在新的竞争对手描述中所概述的那样，许多公司已经以低得多的费率或将虚拟和直接初级保健结合起来提供虚拟保健。考虑到这一点，当远程医疗使用与面对面医疗相同的基础设施，而其他供应商正在提供虚拟服务时，保险公司不太可能支付全价。

In addition to revenue disruption, healthcare faces lower overall reimbursement and higherbad debt. With a predicted25 to 43 million在大流行期间失去雇主赞助的医疗保险的人，在接下来的一两年里，58%到90%的人要么转向医疗补助，要么完全没有保险。

Fixed Costs

On the cost front, over the last decade or more, many organizations have acquired or built a network of clinics across different geographies and specialties. Frequently, clinicians don’t use all of their exam rooms—not necessarily indicating that physicians aren’t busy, but that the utilization optimization of patient rooms is lower than it could be.

Now, with a 30 percent drop in volume for these already underutilized large assets and a potential 30 percent shift of that volume to virtual care, health systems have considerable fixed assets and pay duplicate for staffing, resources, and equipment they’re not using. As reimbursement goes down and the delivery model continues to shift, organizations can’t sustain underutilization.

许多新的护理模式没有任何办公空间或巨大的固定资产。一些竞争对手，如沃尔玛或CVS，通过将办公空间放置在正常营业的地方来有效地利用办公空间(不管是否提供服务，这都会产生大量的收入)。许多卫生系统将不得不重新审视它们的实体足迹，并作出艰难的决定来优化它们的诊所。固定成本不再是固定的。较低的收入加上较低的成本结构使固定成本成为迫切关注的领域。

Physician Compensation

Physician compensation is the biggest single cost for healthcare organizations, making it a priority area as delivery models shift. As the revenue example showed, the economics and operations of telehealth differ from traditional healthcare delivery. Organizations can’t keep paying doctors on the same model and even the same rate, as they were paying them based on estimated total revenue. Additionally, work RVUs are abstract and misaligned—whether the visit is 5 minutes or 45, reimbursement is the same based on the coded level and billed item. In the future, health systems may have to measure physicians more realistically (something that leads to operations as opposed to arbitrary work RVUs). The work RVU based on compensation plans won’t align with telehealth economics or incentives.

Six Strategies to Navigate Healthcare Delivery Shifts and Abrupt Changes

With an understanding of the new revenue challenges of the COVID-19 era, health systems can follow six strategies to recover financially and navigate a new healthcare landscape:

1: Understand Costs

Top-line revenue is likely to go down and stay down for the foreseeable future. Organizations must understand and manage your costs and make strategic decisions.

2: Optimize Clinic Space and Other High-Cost Resources

With lower volumes, health systems need to understand their assets and high fixed costs, which requires understanding the utilization of these resources—the market, where the patient populations are, the financials behind the resources, and potential patient impact of addressing them. Organizations need to build a strategy for delivering virtual care and measure how that would impact their overall footprint.

3: Don’t Be Pennywise and Pound Foolish

Lowering cost doesn’t mean cutting costs across the board. For example, consider investing in resources like a scribe to help clinicians with notes, which will allow clinicians to see more patients. Understand the full scope of these decisions, because hiring and investing may increase productivity.

4: Address the Economic Realities of Virtual Care

Health systems can’t keep paying clinicians the same way when the economics and operations are different. The clinician compensation model needs to be simple, clearly stating what the model incentivizes.

5: Build a New Primary Care Strategy and Business Model to Compete in this New World

Large employers, and even small ones, will likely move volume away from traditional healthcare systems if they can’t keep up from a customer service and patient access standpoint (optimize wait times, scheduling, etc.). Health systems need to revisit their primary care model, start developing direct primary care models for local employers, and better optimize for virtual and in-home care.

6: Learn How to Take on Real Risk

COVID-19 has exposed the flaws in the fee-for-service model. As volumes have gone down, traditional health systems and their model of just managing volume doesn’t work.

Systems that have significantly taken on risk will fare better through this pandemic. On the payer side, where they may be 40 to 50 percent of their own volume, and they’re not paying out claims, they offset the lower revenue and volume on the provider side. Instead of grasping onto the fee-for-service world or dabbling in between risk models where there’s only limited upside risk, health systems must understand their costs and the populations they can impact, then take on risk accordingly.

Health Systems Must Adapt to Survive

卫生系统从COVID-19中获得的经济复苏看起来不太可能恢复到大流行前的医疗商业环境。卫生系统需要改变原有的收入结构、假设和财务做法，以适应新型竞争和消费者预期，以及基础设施的变化。由于多种因素的作用，该行业向虚拟医疗的发展将对收入流产生最大的影响。深入了解医疗保健的新财务布局以及向远程护理提供转变的财务影响，将有助于组织适应并在医疗保健经济找到新常态时取得成功。

Additional Reading

Would you like to learn more about this topic? Here are some articles we suggest:

1. What Health Systems Need to Know About COVID-19 Relief Funding
2. Activity-Based Costing in Healthcare During COVID-19: Meeting Four Critical Needs
3. Hospital Capacity Management: How to Prepare for COVID-19 Patient Surges
4. Healthcare Trends During COVID-19: Top Five Areas to Watch
5. A Sustainable Healthcare Emergency Management Framework: COVID-19 and Beyond

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