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5 COVID-19 recovery considerations for health care organizations

INSIGHT ARTICLE  | 

In a recent health care industry webcast, RSM senior analysts Rick Kes, Matt Wolf and Jessika Garis provided valuable insights on what hospitals and health systems should consider as they address the organizational impact of COVID-19. The following recaps five key takeaways from their presentation.

1. Address uncertain times now and post-COVID-19. Organizations must address five business elements within the organization during the recovery period, including: operational uncertainty, regulatory compliance, supply and demand shock, workforce dynamics and liquidity.

2. Relief funding can be complex and cumbersome. Organizations are addressing how to navigate the different sources of relief funding available while meeting the requirements for the funds already received. Four of the largest publically traded for-profit health care systems have already received relief funds of more than $1.4 billion collectively; significant funding options exist and it is important for all health care organizations to understand those options and be prepared to move quickly and efficiently to obtain them.

There is now $175 billion in funding available through the Public Health and Social Services Emergency Fund established under the CARES Act as well as the Paycheck Protection Program and Health Care Enhancement Act.

Based on conversations with RSM clients, the key items for consideration include:

  • Understanding and complying with the terms and conditions related to the relief funding and determining how to estimate the organization’s lost revenue.
  • Navigating the Centers for Medicare and Medicaid Services reimbursements guidance related to a 20% increase in reimbursement for COVID-19 diagnosis, temporary sequestration and the expansion of telehealth services.
  • Determining whether the organization is eligible for Federal Emergency Management Agency assistance and understanding the public assistance process.

It is essential for health care organizations to appropriately track their expenses and lost revenue.

3. The deal environment post-COVID-19 is changing within health care. Presenters discussed the deal environment for both before and after the onset of the coronavirus. The strong history of health care deals will be challenged over the short- and medium-term. While the future of deals and deal-making may change, the strong secular trends that drove historic activity will remain or even accelerate as a result of the global pandemic.

Shelter-in-place orders and moratoriums on elective procedures will exert financial pressure on all health care organizations and potentially expand the number of companies looking for financing from nontraditional sources such as private equity.

While many funds and management teams are focused on stabilizing their existing companies, they will soon return to health care with renewed interest. The tailwinds that drove investing before the pandemic remain: health care is a generally fragmented industry with rapidly increasing costs and a changing demographic. Furthermore, the pandemic is accelerating the sector’s adoption of digital technologies such as telehealth, which will further disrupt some legacy organizations and drive deal volume.

These same growth factors, coupled with low asset yields across the globe, will continue to drive institutional investors to pour money into health care-focused funds. Dry powder for health care buyouts exceeds $165 billion, according to Bloomberg, and we expect that amount to increase.

As deal volume returns to normal, we may see more minority interest and debt deals as health care organizations grappling with the pandemic seek additional funding to fill gaps left by relief programs. However, with the global pandemic fresh in everyone’s minds, our presenters indicated we may see leverage on deals decrease overall and a modest return of debt covenants. This increased demand for capital will likely suppress multiples at least over the medium term. 

4. Consider telehealth’s long-term impact. Presenters discussed how health care organizations with the desire to emerge from the pandemic with a competitive advantage must think about leveraging telehealth to transform the patient experience. It's important to understand that patients will expect their digital health care experience to mirror what they expect from retailers. When thinking about the consumer experience as it relates to digital retail, some factors to consider include: convenience, on-demand buying, informed decision-making, and ultimately, a feeling that the best value was delivered for the money spent.

We’ve seen a rapid increase in telehealth visits. Ascension Health System and Vonage reported a 2,000% increase between March and April. Also, the CMS reported an increase in telehealth visits from 100,000 per week to 300,000 for the last week of March. With such a large increase in telehealth visits over a short period, health care organizations have to evaluate whether their telehealth platform can address the future desires and needs of their patients.

Some organizations had not considered implementing a telehealth platform until COVID-19, and the office of civil rights waived some HIPAA regulations to allow the use of non-HIPAA-compliant apps. About half of the participants in the RSM webcast who answered polling questions indicated they use a HIPAA-compliant app. However, using a HIPAA-compliant telehealth application does not ensure the platform will be successful in meeting the needs of the consumer and patient.

5. Expanding telehealth’s platform beyond COVID-19. Presenters discussed how leveraging wearables and contact tracing can enhance an organization’s telehealth platform while meeting consumer demands. Also, health care organizations should evaluate how their telehealth platform can expand beyond the COVID-19 visits they are currently providing. Additional telehealth visits that should be considered are elective visits, routine visits, outpatient visits, monitoring of chronic conditions (such as diabetes and asthma) and remote monitoring in the home health setting.

For more on COVID-19 business recovery insights, check out RSM’s Coronavirus Resource Center.

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