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The Keckley Report

Resuming Elective Procedures Possible Lifeline to Hospitals, Different Story for Health Insurers

By April 27, 2020March 1st, 2023No Comments

On March 18, the Center for Medicare and Medicaid Services (CMS) recommended cancellation of non-essential procedures “to conserve critical resources such as ventilators and Personal Protective Equipment (PPE), while limiting the spread of COVID-19.” Following nudging by American College of Surgeons, the U.S. Surgeon General and the CDC. The rationale was simple: to make space and frontline personnel available for anticipated Covid-19 surge, non-emergent procedures and tests in hospitals should be suspended to allow time for hospitals to prepare. Hospitals cut staff. They cancelled surgeries. They invested in infection controls, studied coronavirus patient care protocols and watched the surge in New York City speculating where it might hit next.

Most hospitals complied with the policy by suspending elective procedures.  Most prepared for the worst. For some, the surge happened. For most it didn’t, at least up to now.

On April 19, CMS advised that elective procedures could resume if hospitals met “gating criteria” i.e. a declining level of flu COVID-19-like symptoms within a 14-day period, adequate testing, infection controls, social distancing and protections for frontline workers. In its statement, CMS was careful to emphasize that local and state officials would be responsible for deciding about the timing of resumption and noted endorsement of the policy by the American Hospital Association, the American Society of Anesthesiologists, the Association of Perioperative Nurses and the American College of Surgeons and others.

This week, many states and municipalities have given the green light for hospitals and physicians to resume elective surgeries with “gating criteria” caveats. That’s welcome news since elective surgical procedures represents 50-80% of revenues in most hospitals, 70-90% in medical specialties like orthopedics, urology and others and higher profit margins than their non-elective procedures in both settings. And it’s especially important to hospitals that were not hit by the surge: they saw their revenues plummet without any Covid-19 treatment revenues to offset.

For hospitals, the resumption of elective procedures is a lifeline but it’s no panacea. Most have a long way to go.

Financial losses from delayed/cancelled elective procedures will cost hospitals at least $165 billion this year: that assumes they recover at least 90% of the procedures delayed within 90 days while resuming pre-Covid activity. Even for those getting financial relief from the CARES Act and Phase 3.5 appropriations, the road ahead is uncertain.

On March 20, Moody’s changed its assessment of for-profit hospitals to negative from stable predicting earnings declines over the next 12 to 18 months “as caring for patients infected with the coronavirus increases costs and reduces profitability.” Fitch and Standard & Poors offered similar assessments noting 30% declines in stock performance for bell weather chains like HCA and others.

By contrast, Moody’s outlook for private health insurers is stable.  In its outlook released last week, it concluded “The financial impact of the coronavirus on US health insurers in 2020 is highly uncertain, and will depend on the pandemic’s severity and duration… However, US health insurers will nonetheless remain profitable under the most likely scenarios… we maintain our stable outlook on the sector….”

For health insurers, the resumption of elective procedures is another day at the office.

Projected 2020 losses for health insurers from the coronavirus vary widely:  Per Covered California, the range is $34 to $251 billion for commercial insurers (not including people enrolled in Medicare Advantage or Medicaid Managed Care Plans. Per America’s Health Insurance Plans, it’s $84-139 billion including commercial insurers, Medicaid MCOs and Medicare Advantage plans. Some of that is due to a projected loss of 6 million enrollees in their commercial lines of business and some of that due to coronavirus-related claims. But analysts agree that the costs associated with covid-19 treatments and hospitalization are offset and then some by the delay or cancellations of elective procedures. That’s why insurers like UnitedHealth’s earnings released last week beat expectations for the 1st Quarter and forthcoming releases by Humana, Anthem, Cigna and CVS (Aetna) are likely the same. For private health insurers, the coronavirus looks to be a net gain, especially in states where the elective surgery discontinuation was followed but the Covid-19 virus did not create a hospital surge.

Looking ahead, health insurers enjoy advantages in navigating the coronavirus storm that hospitals don’t: two provisions in the Affordable Care Act deemed as “market stabilization” initiatives can be altered to protect health insurers going forward:

  • Reinsurance: Reinsurance protects insurers against losses from extremely high-cost enrollees.  Health insurers can lobby for coronavirus’ protections and funding for their enrollees. The same construct can be used to protect private insurers for their 2021 premiums if the ‘attachment point’ for insurers is set at $20,000 to cover ventilator-assisted ICU hospitalizations. In the ACA, the attachment point is $45,000.

  • Risk Corridors: Risk corridors protect insurers against extreme gains or losses from inaccurate premium setting. In the ACA, insurers who spend too little on actual medical care are penalized and those who spend too much get a rebate. For 2019, insurers paid $2.7 billion in rebates to individuals and businesses for failing to meet minimum MLR requirements in the ACA: 80% for individual plans and 85% for groups. Temporary or permanent risk corridor concessions by the federal government might prompt insurers to structure products and premiums attractive to the 26,000,000 who filed unemployment, the 6,000,000 who are exiting their employer sponsored plans or even the 28,000,000 who are uninsured.

But if policymakers choose not to consider provisions that keep coverage intact, private insurers can raise their premiums, increase co-pays for enrollees and design plans that limit their financial exposure. In the process, national insurers with strong balance sheets will acquire smaller plans paying less than pre-Covid valuations while diversifying into businesses that insulate them against future market volatility.

Private insurers have more cards to play; hospitals don’t. That’s the bottom line.


P.S. Restoring elective procedures in hospitals and ambulatory surgery centers is a race. Several start-ups are addressing the need. Example: MedTel is a software solution that provides an end-to-end operating room scheduling and workflow solution to reduce cancellations and increase OR team efficiency. For more information, go to   


Coronavirus Funding: Congress Approves $484 billion “Phase 3.5”

To date, Congress has authorized $2.684 trillion in emergency grants and loans to individuals, businesses and healthcare providers: the CARES Act ($2.2 trillion March 27) and Phase 3.5 ($484 billion last Thursday) that includes…

  • $320 billion for small businesses (Paycheck Protection Program): PPP loans are forgiven if 75% of funds are used to cover employee salaries.

  • $75 billion for hospitals

  • $60 billion for EIDL (Economic Injury Disaster Loan)

  • $25 billion for additional testing including $11 billion directed to states

Related: Last week, HHS Secretary Alex Azar announced the department will distribute $20 billion from the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s $100 billion provider relief fund this week. It will be distributed to providers excluded in the first wave of grants i.e. children’s hospitals, independent physician groups and others.

“CARES Act/COVID 3.5: Loans & other financial assistance for physician practices” American Medical Association April 24, 2020 ”CARES Act Provider Relief Fund” HHS

Oliver Wyman Assessment: 10-15% Cost Reduction Key to Recovery for Hospitals

“The few systems that transform their cost structure and improve their cost position by between 10 and 15% of their operating baseline are poised to weather the storm.” That’s Oliver Wyman’s assessment of the acute market’s path to recovery. The report also projects that in addition to operational cost reductions, system portfolio rationalization and care and payment transformation have the potential to double savings to 20-30% of addressable savings.

“COVID-19’s Economic Impact for Health Systems” Oliver Wyman April 23, 2020

Matrix Report:  Covid-19 Severity Higher than 2018 Influenza Pandemic

Matrix Global Advisors (MGA) forecasts that 12.3 to 26.3 million people will be hospitalized in the U.S. as a result of the coronavirus. Using the Centers for Disease Control and Prevention’s Pandemic Severity Assessment Framework, MGA modeled attack rates of 25% and 40% and case-hospitalization ratios of 15% and 20%. Based on its scoring methodology, COVID-19 and the 1918 influenza pandemic scored highest for clinical severity and transmissibility—7 and 5, respectively—as compared to the 2009 H1N1 that scored 2 for clinical severity and 3 for transmissibility.

Brill, Robinson “CDC’s Pandemic Severity Assessment Framework and COVID-19 Hospitalization” Matrix Global Advisors, April 2020

KFF Poll: Public Remains Cautious about Coronavirus

Per the latest Kaiser Family Foundation Poll conducted April 15-20…

  • 51% of U.S. adults believe “the worst is yet to come.” coronavirus outbreak in the U.S. vs.74% 3 weeks ago.

  • 80%) say strict shelter-in-place measures are worth it in order to protect people and limit the spread of coronavirus vs.19% who say the strict shelter-in-place measures are placing unnecessary burdens on people and causing more harm than good.

  • 84%) say their lives have been disrupted at least some by the coronavirus outbreak in the U.S.—up 12% from the KFF Health Tracking Poll conducted March 25-30 and up 44% points from the March 11-15 poll.

Kirzinger et al “KFF Health Tracking Poll – Late April 2020: Coronavirus, Social Distancing, and Contact Tracing “Kaiser Family Foundation Apr 23, 2020

CMS Orders Nursing Homes to Report All COVID-19 Cases to CDC, Plans Public Data Release

Sunday night, HHS ordered the nation’s nursing homes to begin reporting all positive COVID-19 cases directly to the Centers for Disease Control & Prevention (CDC).

Skilled Nursing News – Apr 19, 2020 

Primary Care Physicians Uncertain about Future due to Coronavirus

The Primary Care Collaborative surveyed 1047 primary care clinicians April 17-20. Key findings:

  • 20% report a “shockingly high increase” in COVID-19-related health burdens in the past week among patients who have lost employment, and 36% report a “meaningful increase” among that same group.

  • A third report either a “shockingly high increase” (10%) or a “meaningful increase” (24%) in COVID-19-related health burdens among elderly patients without home support.

  • Over half report either a “shockingly high increase” (10%) or a “meaningful increase” (45%) in COVID-19-related health burdens among patients with pre-existing mental health conditions.

  • 89% report large decreases in patient volume, and 57% say that less than half of their visits in the last week were reimbursable.

  • 42% note the need to layoff or furlough practice members as a stress on their practice.

  • 54% report the use of “used and homemade PPE” and 41% report stress on their practice due to clinicians (e.g., MDs, DOs, NPs, PAs) and nursing staff (e.g., RNs, LVNs, Mas) being out due to illness or self-quarantine.

  • A majority are using video for less than 20% of their visits (43%) or not at all (14%). Instead, 44% of respondents are using the telephone for the majority of their visits.

“Primary Care & COVID-19: Week 6 Survey” Primary Care Collaborative April 23,2020

Centene Creates Telehealth Partnership with Community Health Centers to Address Coronavirus in Medicaid and Underserved Populations

Centene announced the creation of a Medicaid Telehealth Partnership with the National Association of Community Health Centers (NACHC) to help Federally Qualified Health Centers quickly ramp-up their capacity to provide telehealth solutions to meet needs created by the COVID-19 crisis. Centene is dedicating $5 million to the partnership’s efforts which will be used to purchase equipment and provide training and technical assistance to the health centers. “As part of this effort, the partnership will convene FQHCs, as well as Medicaid and telehealth thought leaders, from across the country to pursue a national solution to telehealth implementation for Medicaid programs. Centene is committed to creating a scalable, sustainable solution that also encourages state-specific innovations” according to the company’s press release last week.

“Centene To Equip Critical Medicaid Providers With Telehealth Resources” Centene April 22,2020

Study: Inpatient COVID-19 Cases Cost $14K Per Patient

The CUNY researchers looked at the potential costs to treat patients infected with the virus based on different infection rates:

  • A single symptomatic COVID-19 infection would cost a median of $3,045 in direct medical costs incurred only during the course of the infection mainly ambulatory visits, telehealth consults, or over-the- counter medications.

  • One hospitalized case would cost a median of $14,366 when including only costs during the course of the infection, not the follow-up care.

  • If 80% of the U.S. population gets infected, direct costs could top $654 billion over the course of the pandemic. If 20% get infected, costs could reach $163.4 billion.

Bartsch et al “The Potential Health Care Costs And Resource Use Associated With COVID-19 In The United States” Health Affairs April 23, 2020Free Access

Name and Shame: Unflattering Attention to Companies Thought to be Price Gauging in Midst of

On March 21, Jaguar Health asked the FDA to authorize emergency use of its drug Mytesi (crofeleme) for COVID-19 patients who were experiencing any diarrhea or “diarrhea associated with certain antiviral treatments” including remdesivir, among others. On April 7, the FDA denied the company’s request.  On April 9, the company raised the price of a 60-pill bottle of Mytesi from $668.52 to $2,206.52.

Mytesi net sales and gross sales grew 38% and 44%, respectively, in 2019 compared to 2018” Per GoodRx, the average co-pay for the drug, which is not covered by Medicare, is $769.

“Mytesi Crofeleme”GoodRx

Herman “Drugmaker tripled the price of a pill as it pursued coronavirus use” Axios April 23, 2020



Envision Looking at Restructuring

Envision Healthcare, a Nashville-based healthcare staffing company owned by KKR, has hired Houlihan Lokey to explore debt restructuring for the company which carries $7.5 billion debt. KKR took Envision private in 2018 for $9.9 billion, including assumed debt, after it recorded a $228 million loss in 2017 on $7.8 billion in revenue.

“Exclusive: KKR’s Envision Healthcare hires bank to explore debt restructuring – sources” Reuters April 10, 2020 

Analysis: Medicaid Work Requirement in Arkansas Problematic to CMS Intent

Centers for Medicare & Medicaid Services (CMS) has encouraged states to require a work requirement for ‘able body adults’ seeking enrolled in Medicaid. To date, 20 states have proposed some form of “community engagement” and 10 states have approved work requirements, though most face legal challenges. Only Arkansas fully implemented the policy before a federal injunction barred implementation in Kentucky and New Hampshire.

A 2019 analysis work requirement results for Arkansas and 3 other southern states found no significant increase in employment, hours worked or community engagement activities, Medicaid coverage decreased 10% with no significant increase in employer-sponsored insurance. And by the end of year one, the policy had produced more uninsured adults and increased administrative costs for the Medicaid program.

Benjamin D. Sommers, MD, PhD1,2; Heidi L. Allen, PhD, MSW3 “Medicaid Work Requirements Shift to New Terrain” April 21, 2020 JAMA.

MedPAC: Medicare Hospital Fund Will be out of Money in 2026

In its an annual report released to Congress last Wednesday, the Medicare trustees said hospital expenditures exceeded income by $5.8 billion in 2019 and advised that the hospital fund (Part A) would runs out in six years. Highlights:

  • Total Medicare spending in 2019 was $796 billion

  • While the fund backing Part A remains a risk, the funds for prescription drug coverage in Parts B and D are set to be stable for the foreseeable future because their income and premiums reset annually.

  • Medicare’s costs under current law (which includes Affordable Care Act shared risk arrangements) rise steadily from their current level of 3.7% of GDP in 2018 to 6.0% in 2043.

In 2018, Medicare covered 59.9 million people: 51.2 million aged 65 and older, and 8.8 million disabled. About 36% are enrolled in Part C Medicare Advantage Plans that contract with Medicare to provide Part A and Part B health services. Total expenditures in 2018 were $740.6 billion, and total income was $755.7 billion, which consisted of $745.9 billion in non-interest income and $9.8 billion in interest earnings.

This MedPAC report was prepared BEFORE the coronavirus pandemic. That makes this comment from MedPAC even more urgent: “The financial projections in this report indicate a need for substantial changes to address Medicare’s financial challenges. The sooner solutions are enacted, the more flexible and gradual they can be. The early introduction of reforms increases the time available for affected individuals and organizations—including health care providers, beneficiaries, and taxpayers—to adjust their expectations and behavior. The Trustees recommend that Congress and the executive branch work closely together with a sense of urgency to address these challenges.”



“Non-Emergent, Elective Medical Services, and Treatment Recommendations” CMS April 7, 2020

“COVID-19: Guidance for Triage of Non-Emergent Surgical Procedures” American College of Surgeons March 17, 2020

“CMS Sets Path for Resuming Elective Surgeries as COVID-19 Eases”

“OPENING UP AMERICA AGAIN Centers for Medicare & Medicaid Services (CMS) Recommendations Re-opening Facilities to Provide Non-emergent Non-COVID-19 Healthcare: Phase I” CMS April 19, 2020

Cox et al “How health costs might change with COVID-19” KFF April 15, 2020–MlXr1skSKeacw1OoL4srrzDqMwPqbbEW1gPRV3u8rp0MUHv8ud6r8QKq6YIEQL3yBBN22RMX6IvTWHRfpWNoVWT1aPw&_hsmi=86354391

“Health Insurance – US: Significant coronavirus costs will not impair credit profiles of most health insurers,”

“Health Insurance – US: Significant coronavirus costs will not impair credit profiles of most health insurers,”