The Financial Impact Of COVID-19 On Rural Hospitals
The financial impact of COVID-19 pandemic on hospitals is twofold. First, similar to urban hospitals, elective services have been cancelled or deferred, due to government executive orders and patients’ concern for exposure to potential coronavirus infection. Second, spending for personal protective equipment (PPE) and other equipment has increased. Lower revenue combined with higher expenses has created financial challenges for hospitals. Rural hospitals, especially non-CAHs, are likely to be particularly vulnerable, considering their small size and the fact that they already had low occupancy rate and thin margin prior to COVID-19. Although rural hospitals have not treated as many COVID-19 patients as compared to their urban counterparts, they too experienced service volume drop, revenue decrease, and higher spending on medical supplies.
To address these financial challenges, the CARES Act authorizes $100 billion of financial relief to hospitals and other health care providers, including a special allocation of $10 billion for rural providers (allocated based on operating expenses). The CARES Act also increases Medicare payments for treating COVID-19 patients, removes the “Medicare sequester,” and expands the Medicare Accelerated and Advanced Payments Program. The Paycheck Protection Program and Health Care Enhancement Act authorizes $75 additional relief funds for hospitals and other health care providers (not yet allocated as of June 7, 2020).
It is unclear whether congressional relief, designed to provide fast liquidity to recipients’ cash flows, will be sufficient to compensate for COVID-19’s short-term financial impact on rural hospitals. Even if it is sufficient, certain financial risks imposed by COVID-19 will likely remain for a longer period of time. First, the demand for some elective procedures might decline persistently, affecting hospital revenue. Second, hospital operating expense might increase due to higher PPE spending and newly imposed social distancing restrictions. Third, the expansion of telemedicine might lead to lower revenue for rural hospitals as in-person care decreases.
