Preparing for the Public Health Emergency Unwinding

This post is by Sarah Gaskell, a director at Guidehouse who advises health systems on growth strategies and specializes in issues of sustainability for rural hospital providers, and David Brueggeman, a director at Guidehouse with a focus on managed care, financial, and regulatory strategies. Leading consultancy Guidehouse is a corporate affiliate member of America’s Essential Hospitals.

Making history isn’t always a walk in the park, and preparing for unprecedented change with the end of the COVID-19 public health emergency (PHE) is certainly fraught with anxiety for hospital leaders, especially those who serve patients facing social and financial barriers to care.

The Centers for Medicare & Medicaid Services (CMS) sums up the effect of just one of the upcoming changes:

“The expiration of the continuous coverage requirement authorized by the Families First Coronavirus Response Act (FFCRA) presents the single largest health coverage transition event since the first open enrollment period of the Affordable Care Act.”

On one hand, this challenging milestone is a result of our nation’s improved capacity to manage the threat of COVID-19 infections. However, it means that much of the roughly $200 billion in federal funds allocated over the past three years to states, hospitals, health systems, and other providers is being gradually reduced or eliminated entirely. Plus, CMS is lifting many of its temporary waivers and changes to payment models, medical assistance eligibility determination rules, regulatory requirements, and operational/staffing practices.

Magnifying Existing Challenges

America’s health care ecosystem was fragile before the pandemic hit, and losing these supplemental funds and regulatory waivers could threaten its sustainability.

The effects will reach far across the health care ecosystem, affecting hospitals, health care providers, states, patients, Medicaid agencies, home- and community-based services (HCBS) providers, skilled nursing facilities, individuals without commercial health insurance, and more. For essential hospitals, which rely on a volatile patchwork of federal and state funding, these effects will be especially challenging.

The PHE unwinding will bring major changes in payments related to COVID-19 services. Providers can expect the return of previously waived regulatory requirements and administrative reporting to retain supplemental payment streams, while the end of the Medicaid maintenance of effort requirement will mean more uninsured patients for essential hospitals, which continue to face negative operating margins, staffing shortages, and high labor costs, due to the pandemic.

Primary Pain Points

Guidehouse analysts note that essential hospitals should be concerned about:

• The potential for increased bad debt and uncompensated care because of COVID-19 care coverage changes — exacerbating existing bad debt challenges.
• Potential effects on 340B Drug Pricing Program eligibility for disproportionate share hospitals and others as waivers end for providers no longer considered covered entities under the program.
• The phased-out loss of the federal medical assistance percentage (FMAP) increases and other enhanced payments combined with an increased uninsured population.
• Proposed Medicare rate cuts, Medicare reimbursement changes for certain types of telehealth services, and out-of-pocket cost-sharing changes for Medicare beneficiaries.
• The possibility of hospital-at-home services and telehealth flexibilities going away in 2025.
• Loss of emergency funding, including funds targeted for safety net hospitals, rural hospitals, and hospitals that treated large numbers of COVID-19 patients.
• Workforce shortages and training gaps exacerbated by high turnover and wage adjustments for staff retention and traveling nurse parity.
• Increased administrative costs and inaccurate rates due to Medicaid assumptions of larger-than-actual membership enrollments or utilization.

Rays of Light

While much of this may seem daunting, there is some good news to report. The 2023 Omnibus Appropriations Bill included:

• Reductions in negotiated physician fee cuts from 4.5 to 2 percent for 2023 and to about 3 percent for 2024.
• A one-year delay for lab test payment reductions.
• A two-year extension for critical rural Medicare programs.
• Continued telehealth flexibility.
• Extended provisions for the CMS Acute Hospital Care at Home program.

America’s Essential Hospitals has commended Congress for giving hospitals flexibility to respond to the pandemic, including by leveraging technology to preserve access to care and increase capacity through alternative care sites. The association has called on policymakers to make this flexibility permanent. Further, America’s Essential Hospitals has urged lawmakers to target essential hospitals with additional funding to recover from the PHE and remain on the front lines for the next public health crisis.

Aware of the complexity involved with the changes coming, CMS has held monthly calls with stakeholders and provided overall guidance. Its provider-specific fact sheets indicate which waivers and flexibilities have already expired, have been made permanent, or will sunset when the PHE ends.

Steps to Take Now

If you’re an essential hospital leader exploring options and learning what you can do to set your operations up for success, here are key considerations we recommend for your strategic focus:

1. Determine your exposure to reimbursement changes post-PHE and create a path forward that limits the impact to your financial sustainability.
2. Review CMS guidance and provider-specific CMS fact sheets to make necessary budgetary and operational adjustments. This includes developing updated budget projections and growth strategies acknowledging the ending of COVID-19–related governmental funding.
3. Prepare for audits regarding already-received funding, knowing that the Department of Justice has requested $300 million in funding to perform audits to combat fraud.
4. Assess front-end revenue cycle preparedness for coverage changes, including enhancing real-time eligibility capabilities and updating self-pay/charity care policies.
5. Confirm eligibility for post-waiver 340B drug payments and assess how payment changes will affect your budgets.
6. Adjust workforce levels in accordance with provider waivers related to practice scope and refreshing eligibility training.
7. Facilitate continuity of care by educating existing Medicaid beneficiaries on how to maintain coverage or apply for other insurance coverage. In states with presumptive eligibility requirements, research interactions for individuals who may have missed redetermination timeframes.
8. Work with state agencies to align patient contact information for existing Medicaid beneficiaries.
9. Identify effects on state-specific Medicaid funded programs, including HCBS, fetal mortality, medication therapy management, obesity, and school programs.

Path to Resiliency

Essential hospital leaders need to do as much as they can now — with as much guidance and support as possible — to prepare for changing financial circumstances, workforce levels, and health care delivery methods.

Because the post-pandemic financial picture is highly unlikely to look anything like the pre-pandemic paradigm, proactive efforts to drive resiliency amid another industry evolution should be everyone’s goal. Learn how Guidehouse can help.