The COVID-19 pandemic has taken a toll on healthcare organizations and healthcare workers: Expenses are up, margins are down, and nurse burnout and staffing shortages are rampant. As we begin the third year of the pandemic, its negative effects persist in many states.
Fortunately, the Coronavirus Aid, Relief, and Economic Security Act (CARES)—a $2.2 trillion stimulus bill signed into law in March 2020—continues to provide much-needed relief for eligible healthcare providers, lessening some of the pandemic’s harmful effects and allowing providers to continue caring for the patients in their communities and across state lines via telemedicine.
According to Erik Swanson, senior vice president of data and analytics with Kaufman Hall, “As we enter the third year of the pandemic, hospital and health system leaders face worsening labor shortages that are driving up costs across healthcare. Organizations are having to pay high salaries to attract the workforce they need, while also paying more for drugs and other supplies. Managing through these challenges will require organizations to build new levels of agility and efficiencies.”
Negative impact of COVID-19 on healthcare providers
The effects of the recent pandemic on the healthcare industry are far reaching and well documented. COVID-19 has harmed providers’ personal and financial health and well-being, in turn potentially jeopardizing patient care and quality in the following ways.
Physical and mental health issues become more acute
The American Nurses Foundation’s August 2021 health and wellness survey of more than 9,500 nurses found that the negative effects of COVID-19 on nurses’ mental health and well-being have increased significantly over the last two years.
- One in three (34%) respondents rated their emotional health as not, or not at all, healthy.
- Most of the nurses surveyed cited feeling stressed (75%), frustrated (69%), and overwhelmed (62%).
- Some 42% reported having had an extremely stressful, disturbing, or traumatic experience due to COVID-19.
- Among nurses who stated their intention to leave their position within six months, one in two cited work negatively affecting their health and well-being as a top reason
Nursing staff burnout and shortages worsen
Not surprisingly, many nurses are extremely fatigued and/or burned out. An American Association of Critical Care Nurses survey of more than 6,500 critical care nurses found that:
- 92% indicated that the pandemic had “depleted nurses at their hospitals and, as a result, their careers will be shorter than they intended.”
- Two in three (66%) respondents said they’re considering leaving the profession because of their COVID-19 experiences.
- 76% stated that unvaccinated patients “threatened nurses’ physical and mental well-being”
Patient safety and quality suffer
Studies have shown an association between nurse staffing ratios and patient safety, documenting greater risk of patient safety events, morbidity, and even mortality as the number of patients per nurse increases. Recent research findings demonstrated a reduction in patient safety measures during the pandemic:
- Central-line associated bloodstream infections in U.S. hospitals increased 28% in the second quarter of 2020 compared with the second quarter of 2019, according to CDC data. In the five years preceding the pandemic, central-line associated bloodstream infections had decreased by 31%.
- A study of the impact of COVID-19 on healthcare-associated infections in 148 HCA Healthcare-affiliated hospitals found increases in three infections over seven months in 2020, as the COVID-19 burden increased:
- Central line-associated bloodstream infections (60% increase)
- Catheter-associated urinary tract infections (43% increase)
- Methicillin-resistant staphylococcus aureus bacteremia (44% increase)
CARES Act funding: A lifeline for healthcare providers
Revenue losses, higher expenses, and staff shortages are making it more challenging for some healthcare organizations to stay afloat so healthcare workers can care for patients—and for most organizations to maintain their pre-pandemic focus on patient care and quality.
To partially offset revenue losses and increased expenses, the CARES Act laws provide funding for healthcare providers via several grant programs. In short, the act is a $2.2 trillion economic stimulus bill passed in March 2020 in response to the economic fallout of the COVID-19 pandemic in the U.S.
Healthcare organizations can use CARES Act funds to increase staffing to maintain quality and safety goals, and to purchase personal protective equipment (PPE) and other medical equipment and supplies. CARES Act funding has shown to significantly improve recipients’ operating margins. The median change in Operating EBITDA (earnings before interest, taxes, depreciation, and amortization) margin was 28.4% above 2020 but 6.1% below 2019, without CARES Act funding. With the law’s funding, the median change in Operating EBITDA margin was up 9.4% from 2020 and up 2.4% from 2019.
Provider relief fund
Qualified providers of healthcare, services, and support may receive Provider Relief Fund payments for healthcare-related expenses or lost revenue due to coronavirus. These distributions do not need to be repaid to the U.S. government, assuming providers in each state comply with the terms and conditions. Funding from the law can be used to:
- Prepare for and respond to Coronavirus
- Recruit and retain clinicians and staff
- Purchase masks and other medical supplies
- Modernize facilities or purchase/upgrade information technology
- Pursue other activities needed to respond to COVID-19
Applications for Phase 4 of the Provider Relief Fund closed in November 2021. In December 2021, the Department of Healthcare and Human Services (HHS), through the Health Resources and Services Administration (HRSA), began distributing approximately $9 billion in Provider Relief Fund (PRF) Phase 4 payments to healthcare providers who have experienced revenue losses and expenses related to the COVID-19 pandemic.
HRSA is distributing 25% of Phase 4 funding from the law as “bonus” payments based on the amount and type of services provided to Centers for Medicare and Medicaid Services (CMS) or Children’s Health Insurance Program (CHIP) patients. More than 69,000 provider organizations in the U.S. will receive Phase 4 payments averaging $58,000 for small-sized provider organizations; $289,000 for medium-sized provider organizations, and $1.7 million for larger provider organizations
In January 2022, the HRSA distributed an additional $2 billion in Provider Relief Fund (PRF) Phase 4 payments from the law to more than 7,600 providers.
To date, the HRSA has distributed a total of nearly $11 billion in PRF Phase 4 payments to more than 74,000 providers in the U.S.
“Provider Relief Fund payments have served as a lifeline for our nation’s heroic health care providers throughout the pandemic, helping them to continue to recruit and retain staff and deliver care to their communities,” said HHS Secretary Xavier Becerra. He cited the funding as necessary for “...ensuring that providers continue to have the resources they need to meet the evolving challenges presented by COVID-19 and keep providing critical services to the American people.”
American Rescue Plan (ARP) Rural Payments
To address the disproportionate impact that COVID-19 has had on rural communities and rural healthcare providers in many states, HHS distributes funding to providers who serve patients in rural communities. ARP Rural payments are determined based on the amount and type of Medicare, Medicaid, and CHIP services provided by billing Tax Identification Numbers (TINs) to rural beneficiaries.
Applications for ARP Rural Payments closed in early November 2021. On November 23, 2021, HRSA started distributing almost $7.5 billion in American Rescue Plan (ARP) Rural payments to more than 43,000 providers in states across the country as a result of the law.
Reimbursement for COVID-19 testing, treatment, and vaccine administration for the uninsured and underinsured
HHS provides claims reimbursement to healthcare providers generally at Medicare rates for testing uninsured individuals for COVID-19, treating uninsured individuals with a COVID-19 diagnosis, and administering COVID-19 vaccines to uninsured individuals. A separate program, the HRSA COVID-19 Coverage Assistance Fund, is available to reimburse providers for COVID-19 vaccine administration to underinsured individuals whose health plan either does not include COVID-19 vaccination as a covered benefit or covers COVID-19 vaccine administration but with cost-sharing.
Provider Relief Fund payments resulting from the law can be used for information technology, such as purchasing workforce management software, to facilitate surge staffing and help you manage labor costs. symplr Workforce helps healthcare organizations improve outcomes related to patients, staff, hospital operations, and the bottom line. Our talent management software helps engage and retain employees.
What happens without financial support?
As the pandemic continues, hospitals have postponed elective surgeries again. In January 2022, 40 New York hospitals stopped elective surgeries when COVID-19 hospitalizations surged due to the Omicron variant. But the pandemic’s negative financial effects on healthcare workers linger in other areas as well, underscoring the importance of the CARES Act.
According to Kaufman Hall’s January 2022 Hospital Flash Report, many healthcare organizations ended 2021 in a stronger financial position compared to 2020, but hospitals are still performing well below pre-pandemic levels without CARES Act funding. Hospital volumes and margins haven’t rebounded to 2019 levels, and increasing revenues have been offset by higher staffing and supply chain expenses.
Hospital volumes rose dramatically in December 2021, as the highly contagious Omicron variant spread rapidly. The Omicron surge drove a 98.3% increase in COVID-related hospitalizations in December, with corresponding increases in adjusted discharges (5.5%), adjusted patient days (3.9%), and emergency department visits (7.3%), compared with November 2021. Although patient volumes (adjusted discharges, adjusted patient days, and length of stay) were higher in 2021 compared with 2020, key metrics remained below pre-pandemic performance. Adjusted discharges were down 5.6% in 2021, compared with 2019, with ED visits down 8% and operating room minutes down 3%.
Higher expenses. Gross operating revenue for 2021 (not including CARES funding) was 14.7% higher compared with 2020 and 12.1% higher compared with 2019. However, expenses rose significantly due to labor shortages and supply chain challenges. For 2021, compared with 2019, the total expense per adjusted discharge was up 20.1%, with similar increases in labor (19.1%) and non-labor (19.9%) expenses per adjusted discharge. One analysis found that hospitals and health systems are spending $24B more per year for qualified clinical labor than they did pre-pandemic.
Lower operating margins. Without CARES Act funding, 2021 operating margins were up 44.8% compared with 2020 but down 3.8% compared with 2019.
Lost revenue. Although hospital gross operating revenue was higher in 2021 compared with 2020, hospitals still lost billions of dollars in 2020 and 2021 due to COVID-19. Delaying non-emergent care, particularly during the pandemic’s early days, significantly cost hospitals. Elective surgeries such as joint replacements are big revenue generators. Three University of Pennsylvania hospitals lost a total of $99 million in net revenue from all surgical departments between March and July 2020.
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