Hospitals should form financial disaster plans, including back-up billing services and more cash on hand, an advisor says.

Sept. 22—The biggest financial challenge facing Florida hospitals impacted by Hurricane Irma will be business disruption, according to a new report from consulting firm PwC.

PwC predicted in the report that “months and even years after the winds subside and the floodwaters recede, hospitals and health systems in regions battered by a hurricane will still be grappling with the financial, physical and reputational wreckage such storms cause.”

Hospitals can face closure, unpredictable revenue cycles, disrupted supply chains, credit downgrades, damaged physical plants and displaced workforces and patients, the authors said.

Benjamin Isgur, leader of PwC’s Health Research Institute in Dallas, said the Boy Scouts got it right.

“Be prepared,” he advised hospital executives hoping to perform better in the next disaster.

He said hospitals should try to steel themselves from the next disaster by planning, improving their liquidity positions, and mitigating the impact of the disaster on their revenue cycles.

“From a financial standpoint, using up cash on hand from a service interruption can really hurt a hospital,” Isgur said in an interview. “They’ll need to survive through a few hard months of abnormally low revenue and diminished reimbursements. Sometimes it can affect credit ratings.”

Isgur pointed out that sometimes the damage to the surrounding catch area is so severe that the community is permanently changed, left with homes never rebuilt, and citizens never returning.

 “Jump on the one-time tax benefits that come from storm damage,” he said. “There are programs available to delay filing certain taxes and there are tax credits available for rebuilding infrastructure damaged by storms. They should connect with [the Federal Emergency Management Agency (FEMA)] to begin the process of requesting public assistance for disaster-related expenses.”

Isgur said that hospitals that operate provider-sponsored health plans should “adjust accruals for spikes in claims related to the storm and rapidly ramp up claims processing. People who lost everything in disasters need their health claims handled quickly.”

He said many patients may lack proof of insurance or identification or their coverage may be out-of-network and hospitals need to make accommodations. Before another disaster, they should create backup billing and collections services through cloud-based storage systems or in hurricane-proof off-campus sites to speed recovery.

He also suggested hospitals ensure claims are valued and maximized.

Daniel Steingart, vice president and senior analyst with Moody’s Investors’ Service, said most hospitals today carry insurance to cover property damage and business interruptions.

“The business interruption side is going to be the bigger issue here,” Steingart said in an interview. “They lost a few days of work on the outpatient side and most remained open, but not getting many admissions. Many outpatient procedures will never be rescheduled. And many people will move away from the area, which could exert a long-term impact on patient volume and drive expenses higher.”

Steingart said most hospitals have sufficient liquidity to get them through a temporary drop in revenues.

 “But hospitals really need to know the particulars of their insurance coverage and make sure they carry enough appropriate insurance,” he said. “Usually their bond covenants will detail that.”

Credit Impact     

A Moody’s analysis of the impact of Hurricane Irma on Florida hospitals concluded it will significantly impact some hospitals financially, especially smaller hospitals that suffered more physical damage and closed outpatient services for days.

“In the short-term, hospitals will incur unbudgeted costs for overtime and clean-up, while losing revenue from canceled visits and procedures,” the report authors wrote.

Moody’s identified nine of their rated Florida hospitals and healthcare systems most affected by Irma.

“We haven’t not downgraded them or put them on a watch list,” said Steingart.  “But we will monitor and speak to them over the next few weeks.”

Moody’s found that the likelihood of insurance recovery and federal FEMA aid mitigates credit risks.

“Donor support could also provide funding for recovery for both healthcare and higher education entities. Available liquidity, particularly for hospitals and universities, will be critical to manage cash flow and timing issues while waiting for receipt of insurance and FEMA funds,” the Moody’s report said.

The Moody’s report found more than 20 rated health systems closed various outpatient services or physician offices because of the storm.

As of Sept. 15, 182 assisted living facilities reported closing, with 177 evacuating patients; 10 nursing homes closed and 40 evacuated patients and eight hospitals reported closing to Florida’s Agency for Health Care Administration (AHCA), with seven evacuating patients.  Two hospitals continued to use generators.

Mallory McManus, a spokeswoman for AHCA, said in an interview that she is unsure when the estimated cost of damages to Florida hospitals will be released.

“We are still assessing damages,” Corbett said.

Florida hospitals continued to take in evacuated patients from nursing homes and assisted living centers as late as one week after the hurricane struck.

“Hurricane Matthew gave us many lessons that we learned and applied to this disaster,” Corbett said. 

After President Trump declared a state of emergency for Florida, Puerto Rico, and the U.S. Virgin Islands on Sept. 7, CMS issued blanket waivers to “maintain access to care for those with Medicare and Medicaid by supporting the ability of participating hospitals and other healthcare facilities to provide timely care to as many people impacted by the storm as possible,” and granted exemptions under certain quality and value-based programs to acute care hospitals and other providers.

The IRS also extended tax deadlines to Jan. 31, 2018 to hospitals in the disaster area.

Tom Price, MD, secretary of the U.S. Department of Health and Human Services, also declared a public health emergency for Florida, which allowed the Centers for Medicare & Medicaid Services (CMS) to use certain Social Security Act waivers. CMS also granted extensions to resubmit certain required paperwork (Worksheet S-10) for hospitals in Florida, Georgia, South Carolina, and Puerto Rico.

Hospital Experiences

Lynn Corbett-Winn, marketing director for the Lower Keys Medical Center in Key West, said the hospital’s emergency department opened immediately after the storm on Sept. 10 and the hospital fully resumed normal operation on Sept. 18.

Hospital inpatients were evacuated prior to the storm with the assistance of the North Carolina National Guard, EMS, Army and Naval air personnel “as per our emergency plan, which we follow during our annual hurricane drills,” said Corbett-Winn in an e mail interview.

Steve Sonenreich, president and CEO of Miami Beach’s Mount Sinai Medical Center, said his 600-bed hospital was “very fortunate” to have escaped damage from Irma.

“We fared well during the storm,” Sonenreich said in an interview. “But we spent over $100 million in the last 10 years, a major investment, in hurricane-hardening our roof and windows. We spent $50 million building a facility that could withstand hurricane winds up to 185 miles per hour and moved our generators 40 feet above the flood plain.”

He said Mount Sinai did not close or evacuate patients during the storm and its census actually rose by 25 percent by accepting numerous patients living at home who depended upon electricity, such as patients who required oxygen or equipment.

“We were lucky to dodge the bullet,” he said. But it’s nice to have a bulletproof vest.”

Mark Taylor is a freelance writer based in Chicago.

Publication Date: Friday, September 22, 2017