2021 Not Likely to Bring Return to Normal for Hospitals

2020 has been unprecedented in many ways. As the grim year ends on a more hopeful note – with frontline healthcare workers receiving the first doses of the COVID-19 vaccines and the president’s signature on a new relief package – many are looking for a return to the pre-pandemic norm in 2021. Hospitals, however, are likely to see the effects of the pandemic on their patient volumes and payer mix well into 2021 and beyond, while changes in government policy could also have lasting impacts. As a result, hospitals may continue to see chronic revenue shortfalls even after the acute phase of the COVID crisis has passed.

  1. Vaccines are here, but herd immunity is far off
  2. As of December 28th, the Centers for Disease Control and Prevention (CDC) reported that 2.1 million doses of the vaccine had been administered so far, with millions more expected to receive the vaccine within the coming weeks as distribution ramps up. However, there have been challenges, including the lack of a consistent standard for vaccine prioritization, magnified by the fact that the rollout is taking place at a time of transition from one administration to another. Vaccine hesitancy is also a concern, especially given that Dr. Anthony Fauci, the Director of the National Institute of Allergies and Infectious Diseases, has suggested that the threshold for herd immunity may be as high as 90% of the population.

    All this means that the changes to daily life that the pandemic has wrought, including masking and social distancing requirements, are likely to remain in place for much of 2021, even for those who have already gotten the vaccine.

  3. Patient volumes may be slow to recover, but delayed care could mean higher patient acuity
  4. Given that the vaccine is not yet available to the general public and COVID cases and hospitalizations are still rising, the unprecedented decline in healthcare utilization seen in 2020 is likely to extend into 2021. As the Healthcare Financial Management Association (HFMA) has noted, this means that patients are likely to be sicker, as they postpone elective procedures and preventive care and wait to seek treatment until their condition is dire. Such patients may require more intensive treatment, leading to higher costs, longer hospital lengths of stay, and more delays in discharge to post-acute care.

  5. The future of healthcare reimbursement is government payers and managed care
  6. In addition to the impact of declining service volume, HFMA has noted that the deteriorating payer mix could also affect hospital reimbursement, as increased unemployment leads to “losses of private insurance coverage and increased reliance on Medicaid and self-payment by consumers that have heightened price sensitivity and an inability to pay.” Modern Healthcare has speculated that the uptick in Medicaid enrollment “probably won't be enough to offset declines in healthcare utilization or changes to payer mix.”

    At the same time, there is a trend toward an increased share of government insurance patients enrolling in managed care, with almost 54 million Medicaid beneficiaries (69% of the total) receiving their benefits through an MCO and more than 24 million Medicare beneficiaries (36% of the total) receiving their benefits through the Medicare Advantage program, according to data collected to the Kaiser Family Foundation. This could create problems for providers given that both Medicare Advantage plans and Medicaid MCOs may be more likely to deny or underpay claims than traditional fee-for-service government payers.

  7. Policy changes likely, but direction of the new administration and Congress still unclear
  8. The inauguration of Joe Biden as president could offer both opportunities and challenges for hospitals. In a letter published on December 22nd, the American Hospital Association (AHA) urged the Biden administration to eliminate or reverse a number of regulatory policies implemented under President Trump, including site-neutral payments and state waivers that could potentially reduce insurance coverage. However, as reported by HFMA, Democrats expect Biden to keep in place many Trump rules, including those related to price transparency and value-based payments.

    There are still several unknowns. Perhaps most significantly, control of Congress hinges on the outcome of two runoff races for Senate seats in Georgia, which will affect President Biden’s ability to advance his legislative agenda and get his nominees confirmed. Biden’s pick for Secretary of Health and Human Services (HHS), California Attorney General Xavier Becerra, could have an especially hard time getting through a Republican-controlled Senate. If confirmed, Becerra, who in the past has expressed support for Medicare for All, may be willing to grant waivers allowing states to experiment with single-payer models of healthcare reimbursement. However, Biden still has not named an administrator for the Centers for Medicare and Medicaid Services (CMS), so it is too soon to say for sure what kinds of regulatory actions his administration might take.

    One immediate policy impact in 2021 will be the passage of the COVID relief package, which includes additional funding for the provider relief program as well as a surprise billing fix that allows providers and insurers to settle disputes over out-of-network reimbursement through an independent arbiter. This solution, long advocated for by providers, could lead to a reduction in the number of denied and underpaid out-of-network claims.

  9. Bottom line: hospitals will continue to face the same problems in 2021 – and some new ones as well

While vaccines are becoming more readily available, it will be a long road to recovery from the COVID-19 pandemic. Patient volumes could remain depressed for much of the year, and patients who do come to the hospital may be sicker than usual. With the payer mix now featuring more government payers and managed care plans, providers may experience an uptick in denied and underpaid claims. And government policy remains a major unknown, especially given that we don’t know yet who will control Congress or occupy the key post of CMS administrator. All this means that 2021 will hardly be a return to normal after the upheaval of 2020.

HLS is staying on top of the latest payer and government policy changes that affect denials. Click here to learn more about how we can help you to address your denials in 2021 and beyond.

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