How hospitals should prepare for the end of the public health emergency

Officials at all U.S. hospitals should be looking deep into their unique positions, paying attention to their financial situations, mix of patients and distinct geographies when assessing how the end of the public health emergency, whenever that may be, finally comes. This is according to McKinsey consultants Stephanie Carlton, a Dallas-based partner at the firm focusing on health system reform, and Pooja Kumar, MD, a Philadelphia-based senior partner. They discussed what changes might be coming for hospitals when the public health emergency does end.

How the public health declaration affected hospitals 

The public health emergency has been in place since January of 2020 and is extended every 90 days by the U.S. government. It was most recently extended in May since the May 16 deadline to end the declaration came and went. Whether it is extended again in October remains to be seen, but since its beginnings, the declaration has been ripe with policy changes that are at times confusing to grasp.

Ms. Carlton said by some counts there were more than 200 policy changes made in a six-month period, a shift that they, let alone hospitals, found challenging to track. Some of the biggest changes affect hospital's finances and the types of services they can offer.

"When [the PHE expiration] happens — if they choose not to extend it — there's a number of things that would go into effect," Ms. Carlton told Becker's. "One of the biggest financial effects is the bump in Medicaid funding; just over 6 percent that goes to states, which ends once the public health emergency ends."

This also means patients could potentially lose their Medicaid coverage that was  provided by this boost in funding through the public health emergency, since Congress banned states from disenrolling most Medicaid patients during the pandemic. Other rules about who can use telehealth and from where will also change when the public health emergency ends, although the end to telehealth waivers has a six-month lead time before it kicks in officially. 

It also means the end of the 20 percent increase in payments hospitals receive for treating inpatient Medicare COVID-19 cases as part of the CARES Act funding. Funding for health systems through the Provider Relief Fund will also run out, with $12 billion in total being doled out. Hospitals have also been able to experiment with innovative treatment services, like hospital-at-home programs, all while being reimbursed at regular rates.

While many of these exceptions given by the public health emergency have been helpful, they are in danger of being discontinued once the emergency ends. Advocates, hospitals and policymakers have been campaigning for some changes to become permanent, but what will happen in the long-run remains to be seen. 

"We unfortunately do not have a crystal ball, but we know that a lot of folks on all sides of the spectrum, hospitals, payers and other providers are really working hard and thinking hard about how they can continue to take advantage of, frankly some of the changes that have been beneficial for patients," Dr. Kumar said.

How hospitals should prepare for the potential expiration

With the expiration date for the latest public health declaration rapidly approaching, hospitals and health systems should begin to consider what will change and how they will deal with the policy changes it may bring. This is all while hospitals face a barrage of existing challenges, like staffing crises.

"Hospitals are dealing with the range of workforce challenges right now, so it's hard to even keep on top of that, much less understand the hundreds of regulations and how those are changing in real time," Dr. Kumar said.

She recommends though that hospitals think about what will change and categorize these potential changes into financial and operational buckets, breaking down the challenge. 

"I think that every hospital in the country right now should be stepping back and thinking about their unique situation based on their geography, their mix of Medicaid patients and COVID volume and other kinds of inputs that impact their receipt of these funds," she said. 

Based on these unique situations, hospitals should be forecasting for the next few years and understand how supplementary funding has helped them and how they can go back to operating without it, Dr. Kumar said.

In regard to operational flexibilities, like telehealth and hospital-at-home programs, providers will have to consult patients about their financial situation and their leadership teams to understand whether these innovative programs are something worth pursuing. 

"I think some systems that have the ability to invest [in these programs], will go ahead and continue to do that and others will really be looking to understand what happens coming out of this regulatory flexibility and especially on the payment side to support them to be able to deliver that caliber of care at home."

The changes, though, bring a potential opportunity for collaboration and learning, according to Dr. Kumar. 

"This is a real chance for all stakeholders across the healthcare industry to come together and have these conversations. CMS, states, providers and payers, everyone really, because these are problems — or opportunities if you look at it another way — that will be with us for a while."

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