Dive Brief:
- As hospitals start to receive emergency relief funding to operate during the COVID-19 pandemic, HCA Healthcare, the nation's largest hospital chain, is predicted to receive about $670 million out of the first tranche of funding. Smaller chains Tenet Healthcare and Community Health Systems can expect $230 million and $206 million, respectively, but see larger benefit in relation to EBITDA, according to a note from Jefferies.
- While CMS Administrator Seema Verma said the payments would be "no strings attached," the terms and conditions do impose reporting requirements and other restrictions. The provider must be currently diagnosing, testing or treating COVID-19 patients, the funds must be used for coronavirus response and specifically cannot be used for lobbying or certain levels of executive pay.
- Hospitals have been quick to stress that they need more than the $100 billion allocated in the Coronavirus Aid, Relief, and Economic Security Act to stay afloat financially during the crisis. The for-profit trade group Federation of American Hospitals on Monday requested the fund be replenished with another $100 billion. Independent analysts like Moody's and Fitch concurred the sector will need additional funding to be made whole.
Dive Insight:
The first $30 billion of the CARES Act funding was sent out late last week, but the distribution formula using Medicare fee-for-service billing has been criticized by critical access hospitals and governors in hard hit states as disadvantaging facilities in coronavirus hotspots and those with disproportionate Medicaid and uninsured populations.
Democratic lawmakers have asked HHS to consider the areas hardest hit by the outbreak when the remaining funds are allocated. Some have also questioned the Trump administration's plan to use part of the $100 billion CARES Act funding to pay hospitals to treat the uninsured. That's also an argument made by hospitals.
"This is at the expense of using those dollars as Congress intended — training and protecting health care workers, expanding surge capacity, and assisting those in the health care system who have been forced to ramp down services in an effort to prevent the spread of COVID-19," Sens. Chuck Schumer of New York, Patty Murray of Washington and Ron Wyden of Oregon wrote Tuesday in a letter to HHS Secretary Alex Azar.
Meanwhile, lawyers note that hospitals receiving the funding may have to perform more compliance checks than previously thought. William Horton, partner at Jones Walker, wrote in a blog post Monday that while providers are likely to "cheerfully attest" to accepting the terms in order to receive the funding, they should be aware they are "taking on obligations, some of them potentially quite significant."
One restriction that may be complicated to implement requires billing COVID-19 patients only in-network charges. Horton said that regulation applies to possible cases, and HHS has said it broadly views every patient as a possible case. That suggests hospitals would have to treat all patients as if they were in-network. "That is presumably not the intended result, but a provider who takes the certification obligations seriously must at least think through how it will ensure that it remains in compliance with its certification," he said.
But hospitals may be desperate. Tenet and CHS have pulled their 2020 guidance as facilities in most areas are forced to stop performing revenue-driving elective procedures while also bolstering staff and obtaining the equipment and space necessary to treat COVID-19.
"These extraordinary pressures are putting hospitals, particularly in rural areas, at increased risk of closure," FAH said in a statement Monday. "Absent swift federal intervention, many of these hospitals may never reopen and communities may lose access to vital services."
Hospitals are also getting a boost in the form of accelerated Medicare payments. CMS said Thursday it had delivered $51 billion in expedited funding. Jefferies analysts estimate HCA will receive nearly $5 billion through that program, with CHS getting $1.7 billion and Tenet $1.5 billion.
That funding should ensure "ample" near-term liquidity for leveraged companies seeing major volume declines, included CHS and Tenet, the analysts wrote.