Healthcare Could Face More Losses

F.J. Thomas

Sarasota, FL ( – More than one third of hospitals and health systems are slated to end the year with a financial loss, losing an estimated $54 billion in net income, according to a recent analysis of over 900 hospitals from Kaufman Hall. While the federal CARES Provider Relief Fund should cover around $38 billion, the overall loss without those federal funds is $92 billion.

Although the pandemic is certainly a contributor, fewer outpatient visits paired with more high acuity patients is cited as the main contributing factor, with median length of stays increasing by 8 percent in smaller hospitals, and as high as 18 percent in facilities with 500 or more beds. With more severe patient loads, overall costs per discharge are up 15 percent, with labor costs up by 14 percent and non-labor expenses up by 17 percent when compared to pre-pandemic totals. Additionally, drug costs have increased 24 percent during the same time period.

According to CMS proposal earlier this year, the losses for healthcare could continue into next year if changes are not made in the final rule. In a letter released last week by the American Hospital Association (AHA), executive vice president Stacey Hughes addressed several key factors in the proposal that would impact hospital reimbursement in the coming year.

In 2019, CMS implemented a reduced payment of 40 percent of the outpatient prospective payment system (OPPS) for outpatient clinic visits furnished at excepted Provider-based Departments (PBD) locations. The AHA has requested that payment reduction be restored to the original OPPS payment. The AHA also requested removal of the 22.5 percent drug reduction made under OPPS payments to 340B hospitals, which utilize the drug price control program for uninsured and low-income patients in rural communities.

If the CMS proposal for physicians stands, hospitals aren’t the only ones that will lose out. CMS is proposing a decrease in the conversion factor from 34.89 to 33.58, a reduction equating to 3.75 percent. While the 2 percent sequestration was waived in 2021, a more nefarious sequestration of 4 percent could take its place as a result of the American Rescue Plan Act which was signed back in March and intended to offset the financial effects of COVID-19. While some reports indicate an overall cut of 10 percent, when factoring in the new proposed evaluation and management guidelines which reduce critical services done by office-based providers, the estimated reduction is 20 percent, resulting not only in revenue reduction but also issues with access to care.

Healthcare is clearly experiencing an enormous amount of pressure with increased costs, ever changing guidelines and regulations that are also an expense, reduced staff, and sicker patients. It will be interesting to see what the results of the potential budget cuts are in the coming year, and whether or not providers can stay in business.

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