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Analysis

Two-Thirds of Health Systems Report CARES Act Payments Cover Less Than a Week of Revenues

By Jack O'Brien  
   April 22, 2020

The survey was released as congressional leaders negotiated a coronavirus relief package that includes $75 billion for hospitals.

Initial payments distributed from the Coronavirus Aid, Relief, and Economic Security (CARES) Act will only account for less than a week of revenues for 66% of integrated health systems, according to a recent American Medical Group Association (AMGA) survey.

Two-in-five respondents stated that revenue has declined by more than 50%, a majority of respondents stated that their organizations have less than six months cash on hand, and over 80% have furloughed employees.

“Health systems are using every possible tactic to remain viable: furloughing employees, cutting salaries, exhausting reserves built up over decades, and accessing commercial loans,” Jerry Penso, M.D., M.B.A., CEO of AMGA, said in a statement. “Despite these measures, some groups and systems clearly are at risk to close. The financial challenges for providers aren’t going away in the short term, and we need Congress to provide support that better aligns with that reality.”

Related: A Quarter of Rural Hospitals at 'High Risk' of Closure, COVID-19 Likely to Make it Worse

The CARES Act, signed into law by President Donald Trump late last month, served as a $2 trillion stimulus package, with $117 billion set aside for hospitals dealing with the financial burdens created by the coronavirus disease 2019 (COVID-19) pandemic.

The survey was released as congressional leaders negotiated a $450 billion coronavirus relief package that includes an additional $75 billion for hospitals.

AMGA estimates that health systems will require as much as $318 billion in additional funding to replace half of the projected revenue losses in the next four months.

Related: Despite Federal COVID-19 Stimulus, Many Hospitals Could Face Layoffs Within Two Month

Hospitals have experienced significant financial and operational challenges as a result of the COVID-19 outbreak, which began to spread across the U.S. in mid-March.

Provider EBITDA margins fell 13 percentage points year-over-year in March, according to a Kaufman Hall report released earlier this week.

The main driver for the financial slump was the widespread elimination of elective surgeries, which are typically a large revenue driver for hospitals.

Newsday reported Tuesday that health system executives on Long Island face more than $1 billion in losses related to the cancellation of elective procedures and hiring additional staff to treat patients infected with COVID-19.

Related: Hospital EBITDA Margins Fell 13 Percentage Points Year-Over-Year in March

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


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