On Demand Webinar | Basic | Coronavirus
<div>As COVID-19 pandemic materialized and spread, it has changed so much about healthcare delivery, how we prepare, and how we go about our daily lives.&nbsp; We are reminded how fragile our health and the healthcare system can be. As an i...
On Demand Webinar | Intermediate | Coronavirus
The COVID-19 pandemic is ravaging healthcare facilities, which is partly due to a lack of personal protective equipment (PPE) and other critical supplies.&nbsp; Vulnerabilities in the supply chain have been exposed. As such, hospitals shoul...
On Demand Webinar | Basic | Coronavirus
In the wake of COVID-19, many healthcare providers that traditionally relied on physical office space had to quickly adapt their operations to meet regulatory guidelines and ensure the safety of their employees by shifting to remote work. O...
On Demand Webinar | Basic | Coronavirus
Relying on aggressive financial policies and collection tactics won't help your organization adapt to the "patient as payer" model, especially after the pandemic.&nbsp; Instead, you need a strategy that helps patients easily navigate the fi...
On Demand Webinar | Basic | Coronavirus
<div>The COVID-19 pandemic is causing major economic disruptions and has left many health systems struggling to find ways to drive cash supply and forecast budgets. The ability to pivot and prepare a financial operating plan that provides a...
How To | Coronavirus

How hospitals can preserve cash amid rising costs, crashing revenues brought on by COVID-19

How To | Coronavirus

How hospitals can preserve cash amid rising costs, crashing revenues brought on by COVID-19

  • Revenue from delayed elective procedures is more likely than lost primary care revenue to show up after the COVID-19 pandemic abates, a hospital leader says.
  • Hospitals must prioritize their expenditures, given revenue decreases.
  • Vendors may be willing to renegotiate payment terms during the crisis.

Like most hospitals across the country, 25-bed Henry County Health Center in Mount Pleasant, Iowa, has seen revenues plummet since March 16, when the COVID-19 pandemic halted elective procedures. As a result, gross revenues are off by 50% from the same period last year, said CFO David J. Muhs.

“Right now, what we are planning is a full shutdown of elective procedures until the end of May,” he said.

Meanwhile, 49-bed Fort Memorial Hospital in Fort Atkinson, Wisconsin, has seen gross revenues fall by 60% since March 23, when the state’s “safer at home” order canceled nonessential business activity for at least a month. James Nelson, senior vice president, finance and strategic development, thinks some revenue from elective procedures is delayed rather than lost. But the missed primary care revenue is gone forever.

“The elective procedures will filter back in over a couple of months” after the shutdown ends, he said. “But for primary care, we gave it away for free through our nurse triage line or patient portals or phone calls. We’ll never see any net revenue for it, but the cost structure didn't really change.”

David Muhs, Henry County Health Center

Especially among smaller hospitals, the need to preserve cash is becoming more acute amid plummeting revenues and rising costs. Stakeholders are getting creative in search of solutions.

Organizations redeploying staff, seeking payroll relief

At Henry County Health Center, Muhs is watching expenses carefully. A construction project was halted because the work is considered a nonessential service, but the pause is reducing cash outlay at a good time. Capital purchases are delayed for now.

“We did secure a line of credit with a local bank, and I would suggest everybody look at that as another tool in the toolbox in case you need help making payroll or to get by for a couple of weeks,” he said.

Both Muhs and Nelson are committed to keeping their staffs intact as much as possible despite the dramatic reduction in volume.

“If we were a part of a major [patient] surge, we would need all hands on deck,” Nelson said. “So we’ve been keeping our employees but redeployed them. We have a radiology technician checking temperatures and a physical therapist serving as a patient transporter. As a result, we’ve got a pretty heavy operating expense that is continuing.”

Henry County Health Center has furloughed a few employees, whom it hopes to bring back after the crisis passes. Muhs says he expects departmental actions to generate some payroll relief. For example, the health system employs five centralized schedulers, but only one — who also serves as the clinic receptionist — is needed on-site.

James Nelson, Fort Memorial Hospital

“Of the four who went home, two are taking unemployment for two weeks while the other two work from home, and at the end of those two weeks they will flip,” he said. “I’m seeing departments make decisions like that because they know we’re going to be in for some tough times.”

3 steps to mitigate cash-flow issues

Merlyn Knapp, FHFMA, CPA, president of Rebound Health Resources, has more than 40 years of experience managing turnarounds of distressed hospitals and health systems. Among his roles as interim or permanent CEO or CFO of various organizations was a stint in 2016-17 as CFO at Southern Regional Medical Center in Riverdale, Georgia, where he helped turn around a hospital that had been scheduled to close.

1. Prioritize how money will be spent. Review the accounts payable list to identify which vendors are essential at the moment. “You're going to have to get an idea of who you absolutely have to pay and the ones you can put off for a while,” Knapp said.

2. Ask essential vendors for help to get through the cash-flow crunch. Suppliers of vital goods and services are often huge companies that have the financial wherewithal to be flexible with their customers, Knapp said. “My experience has been that the vendors are willing to work with you if you ask them, but they're not going to volunteer,” he said.

Start by contacting your account representative and, if necessary, keep going higher up in the organization until you find a member of the accounts receivable staff or even an executive who will discuss your situation. Ask for an extended payment period, discounted interest or other concessions that keep your account from being considered delinquent.

3. Ask your insurance representatives to help. Insurers that provide coverage for property and other risk areas may have flexibility that helps you manage cash flow. “In many cases, insurance companies have the ability, for short periods of time, to grant interruption in the premium or at least a reduction in the premium on the idea it would be made up later,” Knapp said.

If your organization has business interruption insurance that protects against losses resulting from hurricanes and the like, check with the insurer about whether coverage extends to losses from the COVID-19 crisis. If it does, file a claim for documented business losses.

About the Author

Lola Butcher

is a contributor to HFMA publications (lola@lolabutcher.com).


Related Articles | Coronavirus

News | Coronavirus

Long-term effects of missed care get more pronounced as data emerges

Researchers are increasingly concerned that patients are missing both needed care management and early detection of serious illness, which could have long-term cost implications.

News | Medicaid Payment and Reimbursement

More Medicaid programs are planning inpatient hospital payment cuts

States are moving to cut their Medicaid inpatient hospital rates amid the pandemic and its more than 400,000 hospitalizations.

News | Medicare Payment and Reimbursement

CMS to add COVID-19-related waivers to value-based payment models, Verma says

Medicare plans to add pandemic-era waivers to its value-based payment models as a way to incentivize provider participation.

News | Medicare Payment and Reimbursement

340B cuts, inpatient-only elimination lead hospitals' OPPS concerns

Proposed OPPS cuts for 340B hospitals and outpatient payment changes drew the most concerns from hospitals and advocates.