Politically, Urbanowicz doesn't believe there's an appetite for increased federal spending. That deadline was Friday, according to CNBC.ĭuring COVID-19, hospitals received financial aid from the federal government in the $175 billion Provider Relief Fund established under the Coronavirus Aid, Relief and Economic Security (CARES) Act. The Department of Health and Human Services has promised providers a 60-day notice before ending the PHE. "We need to make some of those permanent," Urbanowicz said. The end of the public health emergency (PHE), currently scheduled for mid-January 2023, would unwind add-on payments and regulatory flexibilities that have benefited hospitals. In recently released final rules, reimbursement for physicians and hospital outpatient services has fallen short of what these providers say they need to operate. Medicare rates are slightly better, but there's much cross-subsidization going on, Urbanowicz said. Other issues for hospitals include the competition – which has been ongoing since before the pandemic – from ambulatory surgery centers encroaching on outpatient services, to Walmart, Walgreens, CVS and Amazon, UnitedHealth Group and others buying up physician practices or opening primary care clinics.ĬOVID-19 disruptions in the supply chain and inflation are affecting expenses. Usually for a business this means layoffs if expenses can't be trimmed elsewhere, but hospital staff can't be cut if the doors are to remain open, McGahan said. Staff represents the largest percentage of expenses. The first thing executives talk about is labor costs and the current nursing and clinical shortages, he said. Health systems, McGahan said, are "just entering the storm" of realizing their current business model has got to change. Heidi Altman, a professor of anthropology at Georgia Southern University, has been interviewing women in Georgia about the effect on care and health equity of long-distance travel to see a provider. The lack of access is not all attributed to health systems shutting these services at multiple hospitals in a region in favor of offering them at one hospital. It is rather due to hospital closures, especially in rural areas – and a shortage of obstetric providers. This includes hospitals, birthing centers and obstetric providers. A March of Dimes report shows a 5% increase from 2020 of counties that have less maternity access. Maternity care deserts have been well documented. "How do you rationalize that?" McGahan said. When a health system closed its trauma center, it got tremendous political and community pushback, with opponents saying it would impact access to care. "The service line rationalization is that hospitals are like department stores," Urbanowicz said. Nonprofits operate with their mission in mind, which often means being all things for all people. The bottom line is CEOs and CFOs must determine how to balance their service offerings against dwindling financial resources, they said. In today's climate, McGahan said, "The first thing I would do as a CFO is make sure I don't have a capital plan that's more than three months old." Steward Health Care Chairman and CEO Ralph de la Torre said at the time that the transaction would free up additional capital. Or simply selling assets, such as when Steward Health in Utah agreed in 2021 to sell the operations of five of its hospitals to HCA Healthcare. We've seen an uptick in sales lease-backs." McGahan said, "Access to capital has shifted dramatically in the last three months in the public and private sector. "The pressure comes when it comes to liquidity problems. "For-profits have to react more quickly when shares drop," Urbanowicz said. But nonprofits have been slower to react than the for-profit health systems. The financial landscape has changed significantly since COVID-19, and health systems know this, said McGahan, a restructuring advisor who has worked 30-plus years in healthcare. Peter Urbanowicz and Martin McGahan, managing directors with consulting firm Alvarez & Marsal, are not optimistic that the financial challenges facing health systems will improve anytime soon.
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