Health Law & Business News

Coronavirus Outbreak Threatens to Slash Hospital Admissions

March 26, 2020, 8:51 PM

Hospitals could see up to a 20% decline in admissions during the next three to six months due to the Covid-19 pandemic, an S&P Global Ratings analyst said Thursday.

“The system is being asked to essentially ration its resources by deferring elective procedures,” David Peknay, a director with S&P who follows hospitals and health care services, said in a webinar discussing the impact of Covid-19 on for-profit hospitals and health-care service companies.

However, “As of now we think that most of the hospital companies that we rate do have the liquidity to overcome the temporary dislocation that they now face,” he said.

The two sectors of the health-care industry “that are literally on the front lines right now” are hospitals and staffing companies, Peknay said.

Hospitals are likely to get a $100 billion boost from a $2 trillion economic rescue package passed Wednesday by the Senate and sent to the House, which should help them. But many continue to face financial obstacles from the crisis.

Financial Crunch Short-Term

S&P Global Ratings views financial changes from the pandemic as a “short-term dislocation but not necessarily a long term one,” Peknay said. The most important question for companies is their ability to withstand “business dislocations, specifically liquidity,” such as cash flow, he said.

S&P Global Ratings Wednesday lowered its financial outlook for hospital companies for LifePoint and Tenet Healthcare from positive to stable, Peknay said.

For hospital company Quorum Health, “we have already significant default risk baked into our view,” and hospital company Community Health is already already in the low CCC-rated category for financial risk, Peknay said.

In addition to the stimulus bill, actions from commercial insurers also could help hospitals, Peknay said.

He pointed to Aetna, which will waive cost-sharing and copayments for inpatient hospital admissions through June 1 at its in-network facilities for treatment of Covid-19 or health complications associated with the virus for its commercially insured members. Its parent company, CVS Health, made the announcement Wednesday.

Most insurers have previously waived cost-sharing requirements to get Covid-19 testing, but Aetna appears to be the first to waive cost-sharing for treatment.

Impact on Staffing Companies

Medical staffing companies are expecting increased demand for their services as a result of Covid-19, S&P Global Ratings associate Sarah Kahn said in the webinar.

The companies contract with hospitals to provide emergency room doctors, anesthesiologists, radiologists, and other medical professionals,

Staffing companies include TeamHealth and Envision Physician Services, which have come under fire for sending patients high surprise bills when patients receive services for doctors that aren’t in insurance networks.

Deferred Procedures

The deferral of elective procedures means that anesthesia and radiologists are “taking a hit,” Kahn said.

In addition, companies like Mednax, which provides staffing for maternal fetal medicine and pediatric subspecialties, “are taking a hit as well,” she said.

“Many of these procedures are being deferred and not canceled altogether, so we do expect pent-up demand that could come in in the second half of the year,” Kahn said.

Companies need liquidity to survive for the next three to six months, she said.

Working capital for staffing companies “is what we worry most about,” Kahn said. Many depend on hospital subsidies, and “we don’t know how hospitals will fare in the coming months,” she said.

An increase in unemployment could mean more patients will be uninsured, which would hurt staffing companies, Kahn said. That would likely result in fewer people being able to pay their bills.

“This is very bad timing for the staffing industry,” Kahn said. “The companies are already facing significant pressure from payers, and from United especially these days, with some terminating contracts or cutting reimbursement,” she said.

UnitedHealthcare, Aetna, and Cigna have terminated a number of their contracts with Mednax Inc. and anesthesiologist groups over disputes about high rates charged for physicians working for staffing companies.

Outlook for Insurers

S&P Global Ratings said Thursday the outlook for the U.S. health insurance sector remains stable despite the Covid-19 pandemic.

“For private insurers, including BlueCross BlueShield plans, we expect the extremely strong capital levels to offset the expected impact of this pandemic,” said S&P Global Ratings credit analyst Deep Banerjee.

For publicly traded insurers, “product and geographic diversification, higher margins, and increased non-insurance fee-based businesses, for some, will mitigate the negative credit factors arising from lower-than-expected near-term profitability,” Banerjee said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com

To read more articles log in. To learn more about a subscription click here.