Programs staunched the bleeding; what’s next for healthcare providers?

Four in 10 U.S. adults reported delaying or avoiding medical care during the pandemic according to the Centers for Disease Control and Prevention. The result? As COVID-19 filled emergency rooms and COVID wards, other providers—from dentists to physical therapists—experienced empty waiting rooms and cancelled appointments.

In response, the federal government took unprecedented steps to help alleviate the fiscal impact of patients delaying non-urgent care coupled with new costs associated with COVID-19. The steps included both the allocation of funds specifically for healthcare providers as well as policy changes to enhance cash flows. But were they enough to avoid long-term damage to providers?

“It’s too early to judge whether the funds were sufficient to withstand the financial pressures of the pandemic,” said Jason Almiro, senior vice president of healthcare banking at BOK Financial^®. “And, these policies are slated to end in the coming months and may not be renewed.”

In short, hospitals and healthcare providers can no longer depend upon government grants and other financial support to remain profitable and financially liquid.

With programs set to expire by the end of this year, Almiro stated that it’s important that providers understand the policies and programs currently available as well as the impact on their bottom line as they conclude.

Medicare Sequestration

In 2011, Congress passed legislation that reduced Medicare payments by 2%—commonly called Medicare sequestration—in an attempt to balance the federal budget. In March 2020, Congress waived the Medicare sequester, increasing Medicare provider payments by 2%. This waiver will expire on Dec. 31, 2021, and Medicare payments will once again be reduced by 2%.

Provider Relief Fund

Early in the pandemic, Congress allocated $178 billion in payments through the Provider Relief Fund, part of the Coronavirus Aid, Relief and Economic Security (CARES) act. The fund made grants available amounting to at least 2% of a provider’s previous annual patient revenue. Some providers—including safety net hospitals, skilled nursing facilities, and hospitals that treated a large number of COVID-19 patients early in the pandemic—later qualified for multiple grants. As of the publication of this article, approximately $32 billion remains in the Provider Relief Fund; however, there is uncertainty as to whether the remaining funds will be distributed, and it’s not expected that this fund will be replenished.

Medicare Accelerated and Advance Payment Program

In March 2020, Congress made available the Medicare Accelerated and Advance Payment program to healthcare providers. This program helped Medicare providers facing cash flow disruptions during an emergency period by providing a total of $100 billion in advancements on future Medicare payments. Providers were required to begin repaying their advancements one year after the issuance date of the advanced payment.

Paycheck Protection Program (PPP)

In March 2020, some healthcare providers became eligible for loans that could be forgiven if they retained their workers and met other criteria. Healthcare providers received nearly $68 billion of the $520 billion in distributed PPP loans. The window to apply for new PPP loans has expired and many recipients are now working through the forgiveness process.

Medicare Hospitals Add-On Payment

In March 2020, Medicare began providing hospitals with a 20% add-on payment for treating COVID-19 patients. This payment is slated to expire on Dec. 31, 2021, and may not be renewed.

“With all of these programs ending this year and unlikely to be renewed, providers must now pursue other avenues to ensure they maintain necessary liquidity levels,” said Almiro. “Healthcare providers have navigated tremendous uncertainty over the past year and need to be ready to respond to the considerable pent-up demand for services as the pandemic wanes and the economy recovers.”