To ‘keep the lights on,’ doctors and hospitals ask for advance Medicare payments

Reviewed by James Ives, M.Psych. (Editor)Apr 10 2020

Darrin Menard, a family physician in Lafayette, Louisiana, has spent the past month easing patients' anxieties about the coronavirus that has killed 10 people in his parish so far.

But Menard has his own fears: How will his medical practice survive the pandemic?

His office typically sees 70 patients a day, but now it handles half that amount and many of those appointments are done over the phone or computer. He said revenue in the practice has dropped by 40% — which makes it challenging to pay a mortgage, staff salaries, malpractice insurance, utilities, electronic health records costs and other expenses.

To help stay afloat, Menard is one of thousands of doctors, hospitals and other health providers reaching out for a lifeline made available in the series of federal relief measures to counteract the effects of the viral outbreak.

He applied last week for a three-month advance on his Medicare billings, which he hopes will bring in about $120,000 or more to cushion the strain. He's also applying for the Small Business Administration's Paycheck Protection loans to help cover costs of meeting payroll.

"We are quite thankful for the help so I can keep the lights on in the office for us to be available for our patients," Menard said.

The Centers for Medicare & Medicaid Services announced in late March that it would implement for the first time a national accelerated Medicare payments program to help ease the financial strain for health providers. Thursday, officials said they had disbursed $51 billion to hospitals, doctors and other care providers.

"Healthcare providers are making massive financial sacrifices to care for the influx of coronavirus patients," CMS Administrator Seema Verma said in a statement.

"Many are rightly complying with federal recommendations to delay non-essential elective surgeries to preserve capacity and personal protective equipment. They shouldn't be penalized for doing the right thing. Amid a public health storm of unprecedented fury, these payments are helping providers and suppliers - so critical to defeating this terrible virus — stay afloat."

The federal help has inspired private insurers such as UnitedHealth Group and several Blue Cross Blue Shield plans to offer advanced payments and other financial support.

CMS in April has received more than 25,000 requests from providers and suppliers for expedited payments and has approved more than 17,000 requests. Before the pandemic, CMS had approved about 100 requests for advanced payments in the past five years, mostly for natural disasters such as hurricanes and tornadoes.

Most physicians can get an advance on three months of their Medicare reimbursements, and hospitals can get up to six months. Hospitals will generally have up to one year from the date the accelerated payment was made to repay the balance. Doctors will have up to seven months to complete repayments.

To put all this $51 billion in financial aid in perspective, traditional Medicare in 2018 paid $403 billion to health care providers.

Coronavirus patients are overwhelming hospitals in cities including New York, New Orleans and Detroit. But as other health systems brace for similar spikes, they are also seeing sharp drop-offs in regular doctor visits, emergency room arrivals, and the lucrative surgeries and medical procedures that are vital to their bottom lines.

The advanced Medicare payments are just part of the hundreds of billions of dollars the federal government is providing doctors, hospitals and other health providers.

Congress also set up a separate $100 billion program for hospitals and other health providers with coronavirus-related expenses.

The Trump administration Tuesday said it will begin distributing the first $30 billion from this fund to hospitals this week. The money will go to all hospitals based on their Medicare fee-for-service revenue.

Lobbying groups representing safety-net hospitals slammed the decision because they get a lower share of their revenue from Medicare than some other hospitals do. And safety-net hospitals have a higher percentage of patients who are uninsured or covered by Medicaid, the state-federal health insurance program for low-income people.

It also upset hospitals in New York, the epicenter of the U.S. epidemic, because they were getting no more funding than hospitals little affected by the outbreak.

Verma said the administration’s top priority was getting the funding to hospitals as quickly as possible. She said children’s hospitals, nursing homes, pediatricians and other health care providers that receive much of their revenue from Medicaid and other sources will be given priority when the second round of funding is distributed.

Other federal steps to help providers include Medicare for the first time paying for telemedicine treatments at the same rate as in-person visits. Previously, those fees paid less than half of what in-person visits paid.

Congress has also suspended a 2% Medicare reimbursement cut and bumped up Medicare fees by 20% for treating COVID-19 patients. The Trump administration said it is also paying hospitals Medicare rates for uninsured COVID-19 patients.

The billions in advanced Medicare payments are seen as one of the quickest ways to get funds to struggling hospitals and doctors.

"It's money we will desperately need," said Patrick McCabe, senior vice president of finance at Yale New Haven Health, the largest health system in Connecticut. It is counting on more than $450 million in advanced Medicare payments to get through the pandemic — at least for the next couple of months.

The health system, which runs a $5 billion annual budget, could lose more than $600 million as a result of the added expenses of preparing and dealing with COVID-19 and the drop-off in other revenue, he said. Such a loss — without any federal assistance — would more than wipe out the health system's ability to upgrade equipment and keep up with rising expenses, he added.

McCabe said determining whether the federal relief will be enough depends on how long the pandemic lasts.

Shelly Schlenker, senior vice president of public policy and advocacy for CommonSpirit Health, a Chicago-based Catholic health system with 137 hospitals, said she expects all these facilities will apply for advanced Medicare payments.

"Hospitals are in urgent need of assistance to meet the demands of the pandemic," she said. "It's an unprecedented time."

Even with all the government help, industry analysts say, the economic fallout from COVID-19, the disease caused by the coronavirus, will rock the health industry, which communities often count on to fuel their economies.

The average large hospital will see about a 51% decline in revenue as a result of the pandemic, said Christopher Kerns, vice president at the Advisory Board Co., a consulting firm.

While some patients who postpone procedures will return, Kern said, hospital systems shouldn't expect a quick recovery. "Health systems are going to try to capture as much pent-up demand as possible, but there are big challenges with that," he said.

Before the crisis, a quarter of U.S. rural hospitals were at high risk of closing, according to a report this month from consulting firm Guidehouse. These 354 hospitals span 40 states, though most are in the Southeast and central states.

"It was already troubling that the economic outlook for rural hospitals deteriorated during the longest period of uninterrupted economic growth our country has ever experienced," said Dave Mosley, a Guidehouse partner. "A major crisis like the COVID-19 pandemic or any significant economic downturn is likely to make the situation even more dire."