Financial Strategies

Adam Rubenfire: Hello and welcome. I'm Adam Rubenfire, Modern Healthcare's custom content strategist. It is my pleasure to welcome you back to Reimagining Care: COVID-19 Action Steps, a video series sponsored by Hall Render. In today's video, part two, financial strategies. We'll discuss how leaders can optimize reimbursement and stabilize finances during COVID-19. We'd like to thank our sponsor Hall Render, the nation's largest healthcare-focused law firm.

Adam Rubenfire: Now I'm thrilled to introduce our guests for today, Amy Mackin and David Snow, who are both shareholders at Hall Render. Amy works in Hall Render's Raleigh office, and her practice focuses on healthcare regulatory law for hospitals, health systems, clinical laboratories and other providers, with a particular focus on managed care. David works in Hall Render's Denver office, and his practice focuses on corporate and regulatory work for healthcare clients, including hospitals, healthcare systems and physician organizations, with an emphasis on corporate reimbursement and regulatory strategies for optimizing financial results.

Adam Rubenfire: David and Amy, thank you for joining us today.

David Snow: Thanks for having us.

Amy Mackin: Great to be here, thanks.

Adam Rubenfire: Excellent. Dave, we'll get started with you. Dave, can you tell us what is top of mind for CFOs and finance directors right now?

David Snow: Well, I think over the last four months, it's changed quite a bit. It's pivoted several different times, so we really need to look at it in stages, but all of it's really been about survival and limiting the damage that the COVID situation is causing to the financial health of the organization that they lead.

Adam Rubenfire: Excellent. And Amy, what's your take on that? What are you telling your clients to prioritize right now?

Amy Mackin: Yeah, I definitely agree with Dave, it's definitely been an effort to just get your feet on the ground here in the short term. And now that we have a little bit of breathing room, I think there's the long term issues that are starting to come to mind, including the rebounding in care, we know that people received less care, elective surgeries and etc., during COVID. Now we know that there'll be hopefully some sort of rebound, how much of a rebound? How soon will it make up for the losses? We also know that there are larger issues like people delaying care, are they sicker? Are they more expensive to care for? Harder to care for? People have lost insurance, that's going to be a significant issue, I think. And in addition, the even larger issues, are we heading into recession? We have an election year coming up, so it was a lot of moving parts right now.

Adam Rubenfire: Excellent. Well, Dave, let's go back to you. So let's look back at where we've been since March, where we are now, what's coming up short term for 2020, the rest of the 2020 and the longer term beyond that. One marker for the beginning of this crisis was Friday, March 13th, when the president declared a public health emergency and then various federal and state recommendations, guidelines, and other orders, really they quickly followed and effectively shut down all non essential health care services. We're seeing a variety of services available across the country, but in general, this has thrown most healthcare providers into crisis status and survival mode. So what was the first order of business for healthcare finance executives at that point? What were you advising your clients?

David Snow: Well, I think the first thing we saw was kind of traditional reactions, traditional so to speak with prior economic slowdowns or recessions. I've been doing this for over 30 years, working with healthcare systems and hospitals and other kinds of healthcare providers, and the current generation of leadership has been through recessions before. And the first reaction I think was cost cutting and some of the normal measures that you would do in that situation, but unlike any of these other ones, in the last number of years that we have experienced with, this was different because it was not an indirect impact on healthcare services. It was a direct shutdown or partial shutdown of electives and ancillary services of all kinds.

David Snow: And at the same time, you had to pivot to acquire supplies, PPE, ventilators, preserve your staff, the health of your staff for the expected surge. So there was that added kind of second layer of concerns that financial executives had to deal with, on top of trying to pivot their operations to face the anticipated surge. So we were working with clients on expanding bed capacity, moving physician practice locations off campus to make room on campus for the anticipated surge. We had teams of lawyers working with different organizations, in one case to convert an ASC into a hospital location, dealing in a matter of weeks to get ready for the surge. So there was a lot of that sort of thing going on. And then in a lot of places around the country, the surge didn't come or didn't come for quite a while. And so there was a large drop off in revenue that kind of led us toward the next stage, which was some of the legislation that we saw.

Adam Rubenfire: Great. Yeah. I mean, it really seems like approaches have varied across the country, it's really a regional, there's so many regional differences. So Dave, we've seen a lot of regulation, a lot of government programs that have come out to help hospitals and health systems during this time, the Families First Act was signed into law, March 18th, the CARES Act on March 27th, the PPP, Paycheck Protection Program on April 24th. So how did health care financial executive priorities change? How have they changed as these regulations and laws have come out and how did they address these relief opportunities?

David Snow: Well, you really saw a wide variety of processes, I guess, depending on the size of the organization that we were working with, sometimes it was if it's a smaller, independent hospital or a physician practice, it's a pretty small group, and some of the systems, it was a much more formal, steering committee or work group kind of approach, even with project management techniques and that sort of thing, pulling in folks from finance and operations, legal and compliance, risk management, and establishing a process for what was really battlefield triage law.

David Snow: And I don't mean to minimize what our frontline medical professionals are doing, but it was somewhat akin to that from the finance and legal and compliance standpoint, in terms of figuring out what all these new programs were and which ones you could access, and there was a kind of a hierarchy that we developed working with clients to ask questions like, is this the first in line, first come first serve kind of program? Is there a limited pool? Is it only for healthcare providers or is it larger for other kinds of businesses as well? If we access this program, does that exclude us from some other program? Are They're mutually exclusive rules that had to be vetted and sorted through to deal with the CARES Act funding, the Paycheck Protection Program, FEMA, the COVID Uninsured program, SBA loans, all those different things, employee retention, tax credit and all these different programs drawing from different regulatory backgrounds, be it healthcare and Medicare and tax and the SBA programs that are out there.

David Snow: So it was quite a process to figure out what was available, what you could access, what different parts of your organization could access. And I was using the analogy of the government building the airplane is a taxi down the runway at that point in time. And just trying to get the programs assembled through all kinds of sub-regulatory guidance. But that guidance and the funding that did come out during that second quarter was crucial. There's a Kaufman Hall report, commissioned by The American Hospital Association, that states that the pre-COVID operating margin median around the country for hospitals was 3.5%. In the second quarter, it was a negative 15% without all of these government programs, but those programs collectively raised it to a negative 3%. So a 12% impact. Those programs were crucial to sustaining, to the health of the finances of the organization and surviving that second quarter.

Adam Rubenfire: Excellent. And there's no doubt that in-house legal and compliance professionals are working incredibly hard right now and working really closely with their finance counterparts. So, Dave, one last question for you before we transition over to Amy, as the industry moves into the second half of 2020, we're looking forward, what our healthcare finance priorities at this juncture looking forward into the rest of this year?

David Snow: Well, there's really two main things I would say, many organizations access the Accelerated Payment Program, which has been a longstanding Medicare program but was significantly expanded by the CARES Act, both in who could access it and when, and the amount of money that could be accessed. Millions and millions of dollars was advanced to the industry with a payback period, beginning 120 days after you first received your accelerated payment advance, and that 120 day period will first start to run for healthcare providers here in early August. So their Medicare revenue is going to get cut off and they will have to deal with the resulting cashflow impact of that. So organizations are adjusting to get ready for that. I'm aware of some that have decided to pay back that advance if they could just to avoid the revenue cycle complexities of tracking all of this revenue, Medicare billing, that's going to be done with no cash coming in the door.

David Snow: So they're trying to figure out how to pay that back. And then they're trying to figure out how we're going to comply with the CARES Act funding and all the requirements that have been coming out. We're going to see more detailed guidance in mid August with a reporting portal being opened October 1st. So getting ready for that, figuring out how much of the funding we did receive, we think we will be able to keep in the long term so we can recognize it as revenue, how much we need to defer and how we're going to account for and comply with all of those requirements. As you sort, all the CARES Act funding, the 175 billion total, there's been about 106 billion that's been distributed to the industry. So there's still a fair amount to go.

David Snow: That same Kaufman Hall report I mentioned, predicts that the margins for the second half of 2020 will be a negative 7%, indicating somewhat of a comeback from the negative 15 in the second quarter. And that's without funding from these programs. So that additional funding will be crucial to retain what's been received and receive some more as they start to look ahead to surviving and recovering financially from this crisis.

Adam Rubenfire: Excellent. Well, thank you, Dave, for giving us a look into the rest of this year. Amy, we're going to move on to you. So, Amy, I know there've been a lot of concerns about whether providers would get paid for everything they've been doing for COVID-19 patients. It's extremely costly care. I'm wondering have any of those fears materialized yet, or has there been any assurance that, that care will be reimbursed adequately?

Amy Mackin: So we're still early in revenue cycle, right, so most providers have between 90 and 180 days to get their claims in after they've provided the services. And then there's another 30 days usually for those claims to be paid. So, we're early in the process, and I confess that I'm a little cynical about this because day in and day out I handle provider payer disputes and I know that one way that health plans make money, make profits, is when they don't pay claims. And sometimes those claim denials are valid and sometimes they're not, that's really in the eye of the beholder, but in any event, my first concern is always, will there be claim denials from the services.

Amy Mackin: So far, cautiously optimistic, if you are hearing other things, anyone who's listening to this, if they're hearing other things I'd love to hear about it. One thing I was worried about was credentialing, particularly in surge areas, we had physicians coming out of retirement, physicians coming from other areas of the country to help out. And those physicians would not have been credentialed yet onto the health systems payer contracts. And usually if someone's not credentialed their services, don't get paid. I'll shout out to NCQA on this, they gave some early flexibility to health plans, that's a health plan accreditor, and they told health plans, "Listen, you're not going to lose your accreditation if you offer providers a little bit more flexibility on credentialing." So, that was a piece of good news. I also thought the CARES Act having some coverage directives, that was really helpful.

Amy Mackin: So, so far, fingers crossed, I'm not seeing much in the way of claim denials, but again, I'd love to hear from others if they're hearing otherwise. I think we might see a little bit more of that as the revenue cycle plays out.

Adam Rubenfire: Absolutely. Viewers, if you're watching this on Facebook, feel free to comment below and share what you've been experiencing. The payer provider relationship, unfortunately, historically, has been one that can be a bit adverse and tense. So seeing that you're seeing, right now at least, a cooperative spirit and attitude, do you think that's going to continue, Amy?

Amy Mackin: Again, I'm cautiously optimistic about that. You're right, it's usually a contentious relationship even though payers and providers really need each other. So I think that everybody realizes that the uncertainty is not helpful to anyone in the industry and so the spirit has been more collaborative. I know of providers who actually went to their payers and requested advanced payments, similar to what Medicare was offering and in the normal course of business, if I'd had a provider say, "I'm going to call my payer for some extra money." I would have said, "That's funny, good luck with that." But payers were seriously entertaining ideas like that. So I've been encouraging providers that if you have ideas about ways to stabilize yourself, that the payers can help with, they will seriously entertain those requests. And I'm not saying that they're all granted by any means, but this really is a time to bring your innovative ideas to your payers, because I think it's in everyone's best interest to stabilize the market.

Adam Rubenfire: Sure. That's great to see, we're seeing a partnership attitude. So, Amy, I know you have significant experience with various reimbursement models. Were there any reimbursement issues that you were already watching that may have changed course during these recent events?

Amy Mackin: They didn't so much change course, as I think made some steps forward. Two issues that we've been watching really closely along with others, like modern healthcare, are surprise billing and price transparency. Which really are two sides of the same coin. It's all about helping patients rather better understand what their healthcare costs are going to be.

Amy Mackin: So surprise billing, just to level set, it usually occurs when a patient goes to an in network hospital, and while they're there, they receive some treatment from an out of network provider, and then they receive a medical bill that's higher than what they expected as a result. And there's been a lot of attention on this issue, both federal and state levels. And in fact, in an initial version of the CARES Act, there wasn't going to be an attempt to make a pretty robust statement about surprise billing. Fortunately, I think, and from my perspective fortunately, because I think we really needed to keep our eye on the ball on COVID-19, but some did get through. So the final legislation did include some protections on balance billing to patients for their COVID-19 testing and treatment. So, that to me was just a step forward on surprise billing. I think there's more to come on that.

Amy Mackin: Another thing that happened in the CARES Act was, and this is both really about transparency and surprise billing, payers, or rather providers were allowed to put their COVID-19 testing prices publicly on their website and as a result, for any payers for whom they were out of network, that is the rate that the out of network providers are now required by law to honor. So that was significant.

Amy Mackin: And one thing that's still coming down the pike on transparency that I just want to be sure that people are focused on, even though it's not really related to COVID-19, is the hospital price transparency rule, which is scheduled to take effect January 1st, 2021. And that's going to require hospitals to post, not only their charge master, which they already have to post, but also their negotiated rates with all their payers. There's been litigation on this that so far for hospitals has not been successful and a lot of legislative, or advocacy at the agency level, to try to get that stalled or at least delayed so that it doesn't have to start on January one. It's a lot of work that hospitals need to be doing when they should be, in my opinion, focused on COVID-19 care. So, that's coming and I just think that the CARES Act helped to highlight some of what's coming on those two issues.

Adam Rubenfire: Excellent. Amy, you brought up the price transparency rule and it was so important before all this happened and it kind of, wow. I mean, it seems like such a past issue now with COVID.

Amy Mackin: But it's about to be present issue again, Adam, it's coming back because that January deadline is starting to loom.

Adam Rubenfire: Wow. Well, great. That's helpful to our readers. So we're going to ask one final question to both of you, and I'm going to start with David. Dave, so in 2021 and beyond, so we're looking into next year, how will COVID affect healthcare finance and what are you telling your clients?

David Snow: Well, two things really, I would mention in that we're seeing, one is there's going to be a whole new set of financial, legal, accounting, audit, compliance kind of issues to deal with for years to come with all these different COVID programs and not just the CARES Act, provide a relief funding, but the Paycheck Protection Program, employee retention, tax credit, FEMA, all those different programs. We're starting to see requests for internal audit checklists and all kinds of process oriented things to get ready for that. So organizations need to be getting ready to do those things and deal with all those issues to protect the funding they've received and move forward.

David Snow: And then what we are already starting to see, I think, early ripples of, is recovery ideas and organizations completely, as the dust has settled a little bit, starting to reassess their strategies and look even harder than they were before at how to improve your overall financial health and improve the bottom line of the organization, by looking at corporate structure, reimbursement interfaces with the various payment programs with Medicare, obviously, being the big one, how to optimize your 340B footprint and expand it to access those drug cost savings when you can. So we are already seeing increased interest in ways to improve the bottom line by changing up some of the structures we've always had and always lived with into new forms that might improve financial results with these various government funding and cost savings programs.

David Snow: And then a second part of that strategy look is affiliations and collaborations with other kinds of providers and already starting to see collaboration or alignment projects starting to come up between smaller, independent hospitals and larger systems, between physician groups and hospitals and healthcare systems, everybody, this is a shock wave of course, that went through the industry, so everybody's starting to think now, can we go it alone in the way that we thought we could before? So we're going to see a lot of transactional movement, I think, in the healthcare industry in the next few years.

Adam Rubenfire: Excellent. Amy, what about you? What are you and your clients thinking about? What's keeping them up at night for 2021 and beyond?

Amy Mackin: Well, I was actually going to pile on to Dave here because I think there's actually some interesting opportunities coming up, and one issue is capitation, obviously cashflow is very volatile for many providers, however, folks who were capitated were still receiving their steady income from their health plans. And it's really too early to know whether they will ultimately be profitable, but at least in the short term, their cash flow was not an issue. And so I think we are starting to see new willingness on the provider side to look at risk sharing arrangements with payers, because some of the advantages were just really highlighted by COVID-19. Again, the steady cashflow being a key component. So CMS is offering a direct payment pilot for primary care that I think folks are probably aware of. So certain initiatives like that, I think are a real opportunity and providers have their eyes open to that.

Amy Mackin: The other thing is telehealth, which I guess has been the big neon sign throughout COVID, most of us think that the bell will not, cannot be unrung on telehealth. And so I'm really interested long term in what that might do in from a managed care perspective. So might a health plan start to build its networks through telehealth, as opposed to just within the geographic area. There are department of insurance issues in many states about that, but I think if telehealth is here to stay then, and if providers have an idea about how they might be able to offer a telehealth product or network to payers, I think they ought to approach payers about that too. So it's another opportunity that I'm seeing.

Adam Rubenfire: Excellent. It's amazing what this crisis has brought up as should be important for our industry and what can work. Well, that brings us to the end of our conversation. Thank you again, David and Amy, for joining us in such a great conversation and thank you to our sponsor Hall Render. To learn more about Hall Render, please visit hallrender.com.

Adam Rubenfire: To our audience, thank you so much for joining us. Stay tuned for our next video, which will focus on enhancing workforce, operations and data.