Implications of the Pandemic on Hospitals – New OIG Report, Government Response, and What Comes Next

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As many of us are starting to see the small light at the end of the tunnel, many hospitals are still reeling from the stress of the last year. Following the recent release of “Hospital Experiences Responding to the COVID-19 Pandemic: Results of a National Pulse Survey March 23–27, 2020” (the “Report”), a report issued by the Department of Health and Human Services Office of Inspector General (“OIG”) that examines the impact of the public health emergency on United States hospitals, we review federal and state efforts to keep hospitals afloat during this time, and expectations as we continue to recover.

Background

Hospitals have arguably experienced some of the most significant consequences of the pandemic in the health care industry. Frequently acting as the main point of care for COVID-19 patients, as well as providing typical hospital services, hospitals and their individual practitioners have largely felt pushed to the limit throughout the past year. In many places, to meet patient need, hospitals took extreme measures, often under regulatory guidance or instruction, including doubling up patients in intensive care rooms, transferring patients notable distances for available beds, and rationing and triaging for critical resources like ventilators and personal protective equipment, all in the hopes of managing capacity. Hospitals’ efforts to respond have been further complicated by staffing shortages, as individual providers fall sick, require quarantine, or leave the workforce under the exhaustion and trauma of providing care under such intense and high-stakes conditions.

The OIG Report

The OIG, surely recognizing these struggles, undertook a survey to analyze the impact of the pandemic on hospitals. In releasing the Report, the OIG provides a “national snapshot” of the welfare of hospitals across the country, via a “pulse survey” of hospital administrators from 320 hospitals across 45 States, the District of Columbia, and Puerto Rico.

The survey, conducted from February 22–26, 2021 asked three main questions:

  1. What are your most difficult challenges in responding to the COVID-19 pandemic right now, and what strategies have you been using to address the challenges?
  2. What are your organization’s greatest concerns going forward?
  3. How can government best support hospitals?

The surveyed hospital administrators reported a number of concerns across all areas of operation, including health care delivery, staffing, vaccination, and finances. Their main concerns reflected issues reported in previous months, and included the following:

On providing services to patients –

  1. Difficulty balancing the complex and resource-intensive care needed for COVID-19 patients with efforts to resume routine hospital care;
  2. Implications of widespread delayed care for patients who delayed or forwent routine care, and could mean increased hospitalizations and greater need for complex care;
  3. Meeting the increased mental and behavioral health needs among patients;
  4. Exacerbation of existing disparities in access to care and health outcomes; and
  5. Benefits and challenges of telehealth, which has played a key role in the pandemic.

On staffing their facilities –

  1. Nationwide staffing shortages, as the impacts of illness, exhaustion, and trauma weighed on health care providers; and
  2. Implications of staffing shortages on quality and standard of patient care.

On vaccination efforts –

  1. Vaccine hesitancy is rampant, impacting both staff and hospital patient populations, slowing recovery and further decreasing workforce; and
  2. Difficulty in reaching the most vulnerable communities, such as seniors and low-income populations with diminished internet access or technology skills.

On the impact to hospital finances –

  1. Months of financial instability due to increased expenses from responding to the pandemic, and lower revenues from decreased use of other hospital services; and
  2. Uncertainty in how to obtain, and retain, governmental support.

The Report includes strategies that the government has employed to try to address these concerns during the pandemic, highlighting the government’s efforts to enhance knowledge and guidance on prevention, treatment, and discharge; help fill gaps in hospital staffing; continue financial relief; and encourage widespread vaccination. The Report also highlights longer-term opportunities for improvement, such as reducing disparities in access to health care and in health outcomes; building and maintaining a more robust health care workforce; and strengthening the resiliency of our health care system to respond to pandemics and other public health emergencies and disasters.

Government Support for Hospitals

Federal Response

As the OIG noted in its Report, the federal government has made numerous efforts to support health care providers, including hospitals, respond to the pandemic. Perhaps the largest support came from the large relief bills passed by the Congress – the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the American Rescue Plan Act (“ARPA”). The CARES Act provided extensive mechanisms for health care support, including significant contributions to, distributions under, the Public Health and Social Services Emergency Fund (“Provider Relief Fund”). Many hospitals were eligible for at least one of the general distributions from the Provider Relief Fund, if not the $22 billion allocated for rural hospitals, the $22 billion for hospitals and other providers, or the targeted distributions for rural providers and safety net hospitals. The Provider Relief Fund still has billions of dollars not yet allocated, and therefore could continue to provide much needed support. The ARPA, which many providers were disappointed to see did not include further funding to the Provider Relief Fund, still included additional financial relief for rural providers.

Other federal financial support efforts that benefit hospitals include the 20% add-on for COVID-19 diagnoses, the Uncompensated Care Fund, the Hospital Preparedness Program, the Accelerated and Advanced Payment Program (“APP”), and non-health care specific programs such as the Paycheck Protection Program.

However, many stakeholders still do not believe this is enough, and are still hoping to see further changes, such as an extension of relief from Medicare sequester cuts, which went back into effect April 1, 2021, and loan forgiveness under the APP.

State Response

Like the federal government, many states have also taken a direct approach to financial support for health care providers, setting up provider relief and hospital funds, such as Illinois and Mississippi. Other states have passed laws targeted to rural providers, like Kentucky, or legislated infrastructure spending to increase treatment capacity of hospitals related to COVID-19, like Mississippi.

Additionally, a significant number of states have also made numerous regulatory changes and loosed numerous restrictions to allow hospitals flexibility in responding to the public health emergency, including in three main areas: (1) standard of practice; (2) licensure; and (3) immunity from civil liability. Many states, such as Kentucky, waived requirements for standard of practice, letting health care practitioners practice in different settings, perform different services, or treat different patients than would have been permitted in non-emergency circumstances. Similarly, many states, like Vermont, waived licensure application and process requirements to allow out-of-state many categories of practitioners to practice across state lines. Both of these measures intended to address the staffing shortages many providers, like hospitals, were facing. To further encourage practitioners to take advantage of these waivers, at least 27 states, the District of Columbia, and Puerto Rico have provided some level of immunity from civil liability for health care workers, health facilities, or both providing care during the pandemic, e.g., Oklahoma.

Telehealth

Lastly, at both the federal and state levels, we have seen an explosive expansion of the implementation and use of telehealth and telemedicine. Both the federal government and states have taken broad and extensive measures to expand access to telehealth care, including extending and increasing reimbursement and providing more coverage for telehealth services and modalities. Telehealth has been a key complement to other efforts, extending the flexibility of efforts to address staff shortages and access to care.

Recovery and Looking Ahead

As the Report clearly demonstrates, while government support for hospitals during the pandemic has been extensive, there are still outstanding issues to be addressed and gaps to be filled. Perhaps most obvious, calls for better preparing for potential future public health emergencies have only grown louder, as we look to make improvements on the national, state, and provider levels. These efforts include President Biden’s restoration of the White House National Security Council Directorate for Global Health Security and Biodefense, extending certain temporary regulatory and funding changes, and establishing more intensive policies and procedures for handling public health emergencies.

Additionally, as discussed in the Report, the pandemic has both highlighted and exacerbated disparities in the provision of health care, particularly in terms of race, as Black, Latinx, and Indigenous Americans are 1.1 to 1.9 times likelier to be infected with COVID-19 than white Americans, and Black Americans have died at 1.4 times the rate of white Americans. Hospitals may be implicated in addressing these concerns in numerous ways, such as states holding tax-exempt hospitals accountable for disparate outcomes of their community benefit.

The push on these efforts may be further impacted by how the industry is shifting, as we have seen significant, and perhaps even unexpected, merger and acquisition activity during this past year. Considering the decline in revenues that many hospitals and other providers have faced, stakeholders anticipate seeing further consolidation in the market, as the pandemic’s instability opens impacted providers to the possibility of acquisition. As these changes are made, hospitals and other stakeholders will need to be mindful of continued recovery efforts, and implications of what is to come.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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