To Weather Long-term Changes to Healthcare Due to COVID-19, CFOs Need an Action Plan
April 13, 2020
CFOs are mobilizing their organizations now to develop a strategic action plan to ensure their hospitals can keep their doors open.
Dan Michelson, CEO of Strata Decision Technology, said the COVID-19 crisis will likely push hospitals and health systems into a rolling financial forecasting mode of doing business — not just now, but in the future.
With a ton of healthcare industry data being funneled through Strata, Michelson looked at the numbers to see if hospitals are being reimbursed at the right level.
“Our analysis is that they’re not,” he said. “For the long-term impact, there’s no question it falls into a couple of different categories. There will be a fundamental shift in how people do budgeting. Budgets are typically thrown out after a month or two anyway, so there’ll be a shift away from that. That’s as big a shift as you can possibly have — the traditional budget mindset is obsolete. It’s more of an approach where we’re trying to drive improvements month-to-month and quarter-to-quarter. We think that shift will be permanent.”
Another big shift will be in the area of telehealth. The most common usage for telehealth these days is for the common cough-and-cold maladies, but with the relaxation of telehealth reimbursement restrictions from the federal government, usage will likely extend beyond cough and cold — and many of those changes will be permanent.
Steve Lefar, executive director of Strata’s data science division, sees a potentially permanent shift in the way hospitals and health systems offer and administer elective procedures.
“You’re seeing that large systems that have cash are trying to figure out how to get their electives back very quickly by having dedicated facilities,” said Lefar. “These are logistics and facilities management strategies CFOs are trying to manage very carefully here.”
Importantly, there has been a lot of critical care, such as cardiac care, that has been put on hold. CFOs and leadership teams are weighing whether such procedures should be considered electives at all, wary of a second wave of the crisis coming in the form of a potential reimbursement nightmare.
WHY THIS MATTERS: WHAT CFOs AND HOSPITALS CAN DO NOW
Michelson and Lefar envision a three-step action plan for CFOs as they try to wrap their arms around an increasingly complicated landscape.
The first is to address the immediate must-do’s — and in light of new guidelines from the Centers for Disease Control and Prevention, coding is king. Hospitals should follow the coding guidelines for COVID-19 and take steps to ensure they receive the full DRG payments when coding for every bill. This includes coding carefully for complications with a secondary diagnosis, which can mean a difference of hundreds or thousands of dollars in payments.
Having an extremely aggressive, accurate coding and billing effort amidst the chaos will be critically important, as will be ensuring that all costs are captured — not just the typical direct costs, but everything from PPE to overtime and additional supply costs.
“It’s becoming more clear how these folks are going to get reimbursed,” said Lefar. “It’s a matter of organizational survival. They have to get reimbursed for DRG payments. A 20% bump for DRG payments isn’t enough. It needs to be more like 35% to cover the sickest patients, and sequestering that data is really important.”
Hospitals also need to resort to volume whenever they can. Telehealth has been helping in this regard, with the number of digital visits climbing 750 to 1000% since the coronavirus became widespread, according to Strata’s data.
The second step in the action plan is to do what’s best for patients, and the bottom line, by moving people off of respirators as soon as is medically safe and moving them into hospital beds. CFOs and their clinical peers should move these patients quickly and safely to high-quality, cost-effective rehab and long-term care facilities once it’s appropriate, or determine when it’s safe to send patients home instead of incurring costs from long-term care.
“What we’re seeing from COVID patients, those that stay out of critical care, is that the actual lengths of stay are actually a little bit shorter than the typical pneumonia patient, but on ventilators it can be weeks,” said Lefar. “We need to get them into longer-term care facilities to free up capacity for sick patients coming in, but because it’s a lower-cost venue, they need lower-cost therapy, rehabilitation. That’s been pretty interesting for the integrated health systems.”
Step three in the action plan: Become a model of survival. CFOs should anticipate the post-pandemic patient behavior changes that may come. They should also consider critical questions such as when or if their elective surgery volumes will return to normal levels, especially for high-risk populations.
CFOs should also ask whether certain procedures may be moved to telehealth services, and how to tackle that revenue gap in the long-term plan or rolling forecast. Some patient behavior may change permanently; for example, the unprecedented use of drive-through testing and care could become much more commonplace.
It’s about rethinking not only the clinical model, but the financial model that surrounds it. One way some hospitals are doing that is by moving to 24/7 surgeries to make up revenue that’s been lost. With millions of people now unemployed, self-pay has gone up fivefold in a matter of weeks, Strata’s data shows. That means some patients may be willing to undergo surgery at 9 p.m. if, say, it comes with a 40% discount.
“No question, reimbursement and revenue, and margin, drives the ability to invest in the right things,” said Michelson. “It always has.”
Lefar expects there will be a real push for standard authorization rules across all payers, perhaps moving toward standard pricing in the vein of how utilities are regulated.
“We may not agree on who should get insurance, but there could be some profound changes because we know how little it takes to put the healthcare system over the edge quickly,” he said. “It’s just laying bare so many of the flaws in the system. If we want a robust healthcare system in every market we’ll have to rethink how these things work.”
THE LARGER TREND
To date, the focus of the COVID-19 coronavirus pandemic has been on the front lines — the healthcare workers and caregivers who risk their own health by treating patients afflicted with the disease, despite dire equipment and staffing shortages.
But health systems are also undergoing a deep financial crisis. Healthcare CFOs have never faced a situation like this before and so have never modeled this financial scenario.
Exacerbating the problem is that it’s almost a tale of two cities: Cities like Chicago and New York are being overwhelmed by the demand for healthcare services, but other regions of the country are experiencing almost the opposite scenario, where the pressure is more on the financial side than on the clinical side. Either way, organizations have to prepare for what’s coming next.