While weighing decisions such as whether now is the right time to again perform elective procedures, the scenes at Memorial Hermann Health System’s 17 Texas hospitals are painfully familiar to many hospitals across the United States: empty halls, dark operating rooms, quiet emergency departments (EDs), and masked staff waiting anxiously for a possible COVID-19 outbreak to surge in their community.
Over the past several weeks, hospitals have shut down elective procedures to minimize the spread of the coronavirus and maximize capacity to treat patients with COVID-19 and related illnesses. In organizations where COVID-19 volumes haven’t materialized, the ever-present challenge is determining how to staff for a surge that hasn’t come while preparing to move forward with a broken budget.
Some healthcare leaders we’ve spoken to report weekly losses of tens of millions of dollars. Meanwhile, weekly expenses are multiplying.
“One of the reports I’ve been asked to generate is a daily productivity report. That’s new to us, as we’re used to reviewing biweekly productivity,” says April Strouse, director of financial planning, Mount Nittany Medical Center in Pennsylvania. “There’s a need for analytical support that is very responsive so we can determine the cost impact of our decisions in the moment and project the effect on revenue, now and further down the line.”
As organizations plot a path forward in the “new normal,” healthcare finance professionals are exploring a variety of approaches to project the need for services—now and in the months ahead—and understand the potential impact of lost revenue on cash flow and bond agreements. Here are four ways organizations with low COVID-19 volumes are working to stay ahead of a potential surge while planning for recovery.
Keeping a cautious eye on quality metrics
Richi Chaudhry, MHA, PMP, CPHQ, FACHE, enterprise director of clinical integration and performance improvement for Memorial Hermann, has built clinical quality analytics dashboards that include metrics she believes will help during the anticipated surge. Because risk-adjusted quality data is a lagging indicator, the health system has not yet reported any dips in performance related to physician data or rates. But that will change when the February and March numbers become available. Chaudhry is preparing to field questions from clinicians about how the new numbers affect their rates and their incentives.
“When you look at the rates, one surgical-site infection or one mortality can throw off your targets and benchmarks if the denominator shifts,” Chaudhry says. “We are having discussions around potentially pausing some of the quality metrics driven by some of these contracts.”
Value-based contracts and incentive payments also are on the mind of Sue Wells, network manager for cost accounting and decision support at The University of Vermont Health Network (UVM), which operates six hospitals in Vermont and northern New York.
“The metrics we monitor under those contracts will probably not look good for a quarter, at least,” Wells says. “We don’t yet know how that will impact those risk-based arrangements.”
Modeling debt covenant metrics
While financial losses due to COVID-19 may be unrealized, total cash positions are declining, impacting liquidity. Healthcare finance leaders like Marc Stanislas, vice president of finance at UVM, are monitoring financial covenants in existing bond agreements, such as days cash on hand and debt to capitalization, for inadvertent breaches of debt service agreements.
“We’ve been monitoring our debt covenant metrics for more than a month now,” he says. “We're a little disadvantaged because our fiscal year ends on Sept. 30, so the window to recoup our losses is a little smaller. Our philosophy right now is, ‘Cash is king.’ Like many other organizations, we’ve been working to finalize some financing to help us get through the middle of May, when state restrictions on elective procedures are set to be lifted. We’ve also applied for grant funding through the CARES Act as well as Medicare advance funding.”
However, in the midst of immediate financial pain, Stanislas also sees opportunity. “We have 2,200 cases that were postponed due to the pandemic, and we are hoping to recover 90% of those cases,” he says. “We’re looking ahead, making plans for the future so that as the restrictions for elective surgeries are lifted, we can get to capacity as quickly as possible.”
Developing plans to offset losses
Currently, UVM is working with physicians to plan for weekend and evening block scheduling in the operating room to maximize surgery volumes once the state of Vermont eases restrictions on elective procedures, Stanislas says. The health system also is taking a close look at which elective procedures may be bordering on medically necessary procedures, such as cardiac procedures that have been delayed during the pandemic.
A manager of decision support at a large academic medical center on the West Coast said they’re examining the revenue impact of virtual visits—both e-visits, such as email consultations with physicians, and telehealth. Leaders also are making plans to capitalize on increased virtual visits in the months ahead.
“One of the interesting things is that our clinic ambulatory visit counts dropped almost completely when the pandemic began, but picked up again right away,” he said. “Now, our ambulatory visit counts are nearly 60% of what we would ordinarily expect to see, and 70% of this volume is due to virtual visits. That’s a huge pat on the back to our IT personnel for getting telemedicine up and running so quickly.”
UVM also has seen a strong uptick in telehealth cases—from 20 to 25 per day in February to 1,661 on April 9.
Organizations can capitalize on increased demand and growing levels of consumer comfort with this mode of care by offering expanded hours for telehealth. However, not all e-visits are chargeable visits, presenting a unique challenge for healthcare revenue cycle staff as well as clinicians, who must carefully document each e-visit consultation so remote revenue cycle staff can code the visit appropriately.
“How you define e-visits is going to be a really interesting conversation coming out of COVID-19,” said the decision support manager. “We’re also going into Epic to codify the different types of virtual visits taking place so that we can report on them and potentially turn them into a new workload statistic.”
Preparing for a scenario where a COVID-19 surge never materializes
“I think our biggest challenge right now is similar to other people that aren't in the hotbed coastal regions: trying to understand when our peak is coming,” says Allison Lutz, vice president of finance and business intelligence, Excela Health in Pennsylvania. “We’re using very different modeling techniques to drive revenue assumptions.
“At one point in April, some of the data showed that we’d experience a peak in cases within a week, while other external models projected a peak in May,” she says. “We’re not yet seeing the influx that the nation is planning for, and we’re trying to understand whether we’ll see a surge in COVID-19.”
Meanwhile, in Sioux Falls, South Dakota, Sanford Health hasn’t directly experienced a rush of COVID-19 visits, despite a local outbreak. The town’s Smithfield Foods pork plant closed for two weeks due to an outbreak among the plant’s 3,700 workers, but the plant’s health plan directs employees to another local health system. “We’ve offered to help with any overflow needs that system might have, but we haven’t had as many hospitalizations,” says Chris Stevenson, manager of finance. The plant partially reopened on May 4, with 250 workers in two departments.
Health systems in Columbus, Indiana, are also seeing few COVID-19 cases. “We’re still waiting for that surge, building up supplies and preparing staff, just in case,” said Byron Hennessy, finance manager at Columbus Regional Health. “We’re constantly working through cash flow projections—out to March 2021—to project when we might be back to 100% on cash receipts. We’re updating those numbers each week.”
For Stanislas of UVM, the uncertainty faced by his organization and others that have not experienced a COVID-19 surge underscores the importance of financial modeling tools that support agility in a changing environment. Stanislas and his team have been simulating what surgical volumes could look like in the next 12 months, setting goals by service areas and departments regarding how to tackle the current backlog of 2,200 cases.
“One of our biggest questions as leaders comes down to, ‘How much of that backlog do we want to address, month by month, to strengthen financial performance while preventing staff burnout?’” he says. “We’re giving ourselves a window of 12 months to dig out of this, financially, looking at OR schedules by subspecialty. It’s important to realize that our doctors, nurses, and other clinicians are going to need some downtime when this is over. Taking their needs into account while planning for the year ahead will be crucial to our long-term success.”