Yesterday, the Trump Administration began releasing $30 billion of the $100 billion relief package for health care providers. This grant money is in addition to advanced Medicare payments in the form of a loan as well as a 20% premium on the relevant DRGs.
To speed the delivery of funds, CMS made the decision to allocate this first tranche to providers based on their pro-rata share of 2019 Medicare payments which totaled about $854 billion. The decision to allocate the relief funds on this pro-rata basis has met with howls of protest from the hospital trade groups concerned that relief funds would not flow to the most negatively affected providers.
They are probably right.
With elective procedures on hiatus until late-spring to early summer and then subject to the public’s willingness to go to an ASC or a hospital much of the margin producing revenue for THC, HCA and CYH is significantly reduced or eliminated.
Some of the losses can be stemmed through layoffs and furloughs. THC has furloughed some employees until June 19th but we see no evidence that CYH or HCA have done the same. Given their hospital locations in hotspots like Texas, Tennessee, Florida, both THC and HCA may find themselves in the unenviable position of having to retain staff to handle COVID-19 caseload but unable to offset the revenue lost to cancelled elective procedures and other discretionary health care utilization.
As things stand today, the first tranche of relief funds will be distributed to THC, HCA and CYH as follows:
Not exactly an airline or bank bailout deal.
Notwithstanding this rather paltry first step, we tend to think that that the US health care system is now a political and economic priority and both Congress and the White House have little interest in compromising its ability to adequately address the COVID-19 virus.
We are, however, mindful that some in Congress have expressed an aversion to for-profit medicine and no matter what they finally do, we doubt it will do anything more than prevent large-scale facility closures. The result maybe that the industry finally grapples with its bloated cost structure ... but that is a note for another day.