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Analysis

Following the COVID-19 Surge: 5 Hospital Impacts

By Jack O'Brien  
   June 05, 2020

Healthcare stakeholders weigh in as hospitals resume operations and adjust to changing industry dynamics.

Following the first wave of the coronavirus disease 2019 (COVID-19) pandemic, hospitals and health systems are looking back on the damage suffered and anticipating the challenges to come.

Provider organizations are bringing elective surgeries back online after most procedures were canceled for nearly two months to handle the influx of patients infected with COVID-19.

Now, leaders must analyze the impact of the pandemic on both clinical operations and the bottom line while also planning for changes in the post-pandemic landscape.

Below are five insights from healthcare industry stakeholders as hospitals resume operations and adjust to changing industry dynamics.

1. The hospital ramp up and M&A activity deluge

H. Mallory Caldwell, transaction advisory services principal at Ernst & Young LLP, tells HealthLeaders that providers have suffered financially over the past three months due to the absence of revenue generated by elective surgeries.

He says that while his hospital clients have expressed an eagerness for a widespread reopening, these organizations are now grappling with resuming procedures in a more regulated environment, either due to government restrictions or internal patient safety processes.

"All of that has an impact on the amount of volume that [hospitals] can get through the system, so they're coming back in a still-constrained way," Caldwell says. "In talking with providers, the general sense is those who are reopening [are doing so] at 20% of their capacity. [Hospitals] think that's going to last for a while until we've got a vaccine, a good therapeutic, or proven herd immunity. They think that the ramp up is going to be slow."

Caldwell says one of the unique challenges for hospitals is ensuring safety within the facility as patients return for elective procedures that were put off due to the outbreak. He added that hospital executives are trying to anticipate the potential hesitation by patients to return to the facility and implementing proactive steps to reassure them that the environment is safe.

"[Hospitals] are taking measures to separate treatment areas from non-COVID areas," Caldwell says. "One of the tactics that health systems are talking about is returning ambulatory surgery only to ambulatory surgery centers, where you wouldn't have patients there because of COVID. There are a lot of measures to try to both be safe and communicate that it's safe." 

Related: Hospital Finance Leaders Brace for Operational Issues Related to COVID-19

Another trend Caldwell says he is following is the potential for more M&A activity as providers emerge from the coronavirus surge.

He says that there is typically an uptick in healthcare M&A activity following an economic downturn as organizations seek scale to lower the cost of care and smaller providers seek refuge from financial distress.

Forward looking, Caldwell says the heavy economic toll sustained by physician practices during the pandemic is an indicator that there is likely to be a continued increase in M&A activity and joint ventures.

"We expect combinations of all types to be on the rise and they should be," Caldwell says. "[Mergers] can provide great benefits to economic sustainability of all sorts of programs if [providers] build better scale geographically, across the care continuum; there are a lot of good reasons."

2. Plan for patient safety

The resumption of clinical services is crucial for CommonSpirit Health, the Chicago-based system which reported an operating loss of $387 million in Q3 2020 due in part to financial challenges related to the outbreak.

Barbara Pelletreau, R.N.,M.P.H.. senior vice president of patient safety at CommonSpirit, tells HealthLeaders that safely resuming procedures is "the most important task at this time" for the organization.

Pelletreau says CommonSpirit is following an eight-step plan to resume elective surgeries at hospitals. The plan, according to Pelletreau, is based on state and national guidelines to ensure facilities have an adequate supply of personal protective equipment and demonstrate declining rates of infection for 14 days before operations ramp back up.

One of the key developments for CommonSpirit as it has brought its operations back online and adjusted to the 'new normal' in healthcare, has been the organization's ability to be "nimble," according to Pelletreau.

"When I look back on this [crisis], one thing is that as large as we are, we've had to be responsive," Pelletreau says. "That often means taking information that comes out and operationalizing it in less than 24 hours. That can make a huge difference for those that serve our patients and a huge difference for those that are our patients."

3. Rebounding from furloughs and "creative" revenue ideas

Hospitals resuming operations must also account for the labor challenges related to the widespread layoffs and furloughs this spring.

Becky Greenfield, associate attorney at Wolfe | Pincavage, a Miami-based law firm, tells HealthLeaders that organizations are grappling with the repurcussions of furloughing workers to reduce expenses in the absence of revenue generated by elective surgeries.

Additionally, this issue has affected hospital executives, many of which have taken sizable pay cuts. Still, Greenfield says that a few organizations have instituted more worker-friendly furlough options related to paid-time off (PTO) during this crisis.

"[Some employees] are furloughed, they're home, they're not working, they have their benefits, and they can take PTO for as much as they have this year, and borrow PTO for the upcoming year," Greenfield says. "Throughout the 30 days, if they don't have 30 days of PTO, they could borrow and, assuming they come back after 30 days, they'll at least have been paid that whole time. All of this is contingent on what happens in that 30 days and then it will be assessed."

Related: 4 Coronavirus Financial Considerations for Health System Leaders

Looking ahead, hospitals are aiming to make up for lost time and generate revenue to strengthen the bottom line.

Lindsay Lowe, also an associate attorney at Wolfe | Pincavage, tells HealthLeaders that her provider clients have tasked their revenue cycle departments with exploring "creative ideas" for driving revenue growth.

Two tactics have emerged, according to Lowe, including bridging communications with insurers so that providers can bring in additional funding and instituting telehealth services.

"[Providers] are looking to roll out telehealth services," Lowe says. "I think that's a creative avenue for addressing admissions and readmissions, [as well as] keeping [some] patients out of the hospital while having beds for people that need it. I think [telehealth] could help with costs as well."

4. Real estate considerations

The rise of telehealth has also presented provider executives with questions about the future of traditional brick-and-mortar care sites.

Hospital leaders are now reviewing their real estate footprint and deciding what to do with their existing facilities but also planning for how to expand access sites going forward.

Steve Barry, president of Rendina Healthcare Real Estate, a healthcare real estate company based in Jupiter, Florida, tells HealthLeaders that the pandemic is likely to delay capital allocation decisions as provider organizations reassess their positioning at the midway point of 2020.

As it relates to how hospital executives approach their real estate holdings in the future, Barry says he recognizes that while providers are increasingly embracing virtual care solutions he hasn't advised his clients to abandon their investments in brick-and-mortar facilities.

"We are encouraging [clients] to be wise about [their real estate investments], especially in a capital constrained environment," Barry says. "That's one area that we're working with a number of health systems on right now: to try to provide services outside the walls of the hospital, where a patient could get the same kind of emergency treatment they may get in the hospital emergency department but in a safer and more convenient setting."

5. Payer perspective

Despite the occasionally abrasive relationship between payers and providers, several insurers have issued advance payments and grants to hospitals and health systems struggling with the financial pressures related to the pandemic.

John Baackes, CEO of L.A. Care, tells HealthLeaders that the organization communicated with hospitals and health systems during the spring about "how we can help them."

Related: Court Rules Against Dignity Health in Out-of-Network Case, L.A. Care CEO Reacts

To that end, in mid-April, L.A. Care announced its plan to accelerate claims payments and pledged financial support to providers in southern California.

In late May, the organization announced that it had committed almost $120 million to frontline providers battling the virus.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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