Healthcare Business Trends

News briefs: Trends in hospital volumes and margins, and other forces shaping healthcare finance

August 28, 2020 1:54 pm

Hospital volumes continue to lag, in part, due to patients’ COVID-19-related fears

As COVID-19 continues to decline in some areas of the country, hospitals are using different approaches to lure back hesitant patients.

The challenge of recovering patient volumes was illustrated by a June 18 report from Moody’s Investors Service, which found for-profit hospitals had 20% to 40% year-over-year declines in all surgeries.

Ralph Muller, a national adviser for Manatt and former CEO of the University of Pennsylvania Health System (UPHS), said in an interview that the organization has recovered 90% of its pre-COVID volumes.

Many U.S. academic medical centers have had strong recoveries in volume, which may stem from their patients’ morbidity levels, he said.

But Muller also credited a variety of outreach efforts by UPHS, including:

  • Sending digital communications urging patients with serious conditions to return
  • Using texting and other digital outreach to explain COVID-19-related safety measures
  • Providing guidance on steps to follow when patients come to the hospital
  • Directing extra environmental staff to frequently clean public spaces, and cleaning exam rooms after each patient discharge
  • Performing nonemergent evaluations remotely before the patient comes to the ED
  • Enhancing the interactivity of the organization’s website, such as by adding chatbots
  • Offering Q&As and FAQs on the website to address concerns by patients in different disease groups 

Hospital margins positive in May due to temporary federal boost, report finds

The influx of federal assistance in the spring was sufficient to push hospitals’ median margins into positive territory in May, a sharp improvement from -13% margins in April.

Hospitals’ median operating margins reached 4% in May with the help of more than $50 billion in funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, according to a monthly tracking report of more than 800 hospitals by Kaufman Hall. The report concludes that hospitals would have had -8% median margins that month without the federal grants.

The report stated, however, that “the vast majority of hospitals that received CARES funding recorded the entire amount across April and May — reflecting the short-term nature of the relief, unless Congress issues additional funding.” Findings on hospital revenue included:

  • Total gross revenue increased by 29% from April but decreased 14% from May 2019
  • Outpatient revenue increased by 39% during May but decreased by 27% year-over-year
  • Inpatient revenue increased by 19% during May but decreased by 12% year-over-year 

110,000 Medicare beneficiaries were hospitalized for COVID-19 by mid-May

The most vulnerable population to the COVID-19 pandemic experienced nearly 110,000 hospitalizations for the disease by mid-May, according to preliminary Medicare data.

Medicare claims data examined by CMS for Jan. 1 through May 16 identified nearly 110,000 hospitalizations of mostly elderly beneficiaries for COVID-19 care, or 175 hospitalizations per 100,000 Medicare beneficiaries. More than 325,000 beneficiaries (518 per 100,000) were diagnosed with the disease.

Other key COVID-19 findings included:

  • Patients with end-stage renal disease had the highest rate of hospitalizations (1,341 per 100,000).
  • Beneficiaries enrolled in both Medicare and Medicaid had the next-highest rate
    (473 per 100,000).
  • Black beneficiaries had the highest rate of hospitalization among races/ethnicities (465 per 100,000).
  • Rates also were higher for Hispanic beneficiaries (258 per 100,000) and Asian beneficiaries (187 per 100,000) compared with white beneficiaries (123 per 100,000).

“At the end of the day, it reconfirms long-standing issues around disparities and vulnerable populations,” Seema Verma, administrator of CMS, said.

Low socioeconomic status “wrapped up with the racial disparities” was found to be “a powerful predictor of complications from COVID-19,” Verma said. 

Bundled payment participants face choices on 2020 continued participation

Provider participants in Medicare’s largest bundled payment program must decide not only whether to remain in the program but also whether to use new COVID-19-related flexibilities in performance measurement.

The more than 1,000 hospitals and physician group practices that remain in the Bundled Payments for Care Improvement Advanced (BPCI-A) voluntary model face some tough decisions this year, with Medicare offering new options in response to the pandemic. Those options came amid massive disruptions in elective episodes and procedures after many hospitals ceased to offer them during much of the pandemic either voluntarily or in response to government mandates.

“For institutions, they’re evaluating whether or not to even stay in the program for [2021] because of the uncertainty and the financial risk,” said John Kalamaras, business intelligence analytics manager at DataGen. “So, they have to judge how they are doing now and if they are going to continue on in the program.”

That decision-making process will occur amid CMS’s recent release of 2019 performance data, which showed worsening performance among DataGen clients. 

CMS aims to spur value-based payment arrangements between drugmakers and insurers, including Medicaid

A proposed CMS rule aims to lower administrative burdens and kick-start value-based payment arrangements for pharmaceuticals in Medicaid programs and commercial health plans. The June proposed rule would tweak federal rules that some see as a barrier to widespread adoption of value-based payments (VBPs) for drugs based on their efficacy.

The proposed rule “doesn’t necessarily guarantee low prices, but what it does do is it provides a tool in the toolbox for plans to negotiate with manufacturers,” Seema Verma, administrator of CMS, said.

Provisions of the proposed rule include:

  • Changing how manufacturers should calculate the average manufacturer price of a brand-name drug when there is also a generic
  • Allowing manufacturers to report multiple “best prices” for a drug if the prices are tied to a VBP arrangement
  • Changing whether manufacturers should include the value of their patient assistance programs in the calculation of best price, including when assistance programs are impacted by pharmacy benefit managers’ accumulator programs
  • Changing state and manufacturer reporting requirements to the Medicaid Drug Rebate Program 

Hospitals scramble to meet price transparency requirements after court decision

After a judge for the U.S. District Court for the District of Columbia upheld a 2019 CMS rule requiring hospitals to disclose prices negotiated with health plans, hospitals are moving to comply before the January deadline. But the requirements may be misunderstood, some advisers warn.

The decision did not surprise Amy Mackin, JD, an attorney for Hall Render, because administrative law places a large burden on any challenge. However, the judge acknowledged that the decision was “a close call.”

“That was almost a green light to appeal,” Mackin said.

The American Hospital Association and plaintiff hospitals have filed notice that they will appeal the ruling. However, Mackin said an appeals court is not likely to rule on the case before the requirements’ start date, which is why she advised hospitals to try to implement them.

Industry advisers say hospital leaders may be unaware of two aspects of the requirements:

  • The rule calls for separate and unique price lists of elective procedures for each hospital within a system
  • Calculations will be needed to make comparable lists of different health plans’ payment rates 


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