CORONAVIRUS

Coping with COVID-19, Iowa hospitals drew nearly $1B in Medicare advances

But they must repay it, possibly with double-digit interest rate

Clarke County Hospital in Osceola is one of 44 critical access hospitals, and 77 hospitals overall, in Iowa taking accel
Clarke County Hospital in Osceola is one of 44 critical access hospitals, and 77 hospitals overall, in Iowa taking accelerated and advance Medicare payments earlier this year to help their cash flow while dealing with the COVID-19 pandemic’s early days. The Osceola hospital drew $7.3 million in accelerated payments. (Suzanne Behnke/IowaWatch)

Seventy-seven Iowa hospitals, including ones in Cedar Rapids, collected $928.3 million in accelerated and advance Medicare payments available as a government stimulus to cover expenses in the COVID-19 pandemic’s early days last spring.

Yet a repayment requirement that could add a double-digit interest penalty deterred some hospitals from seeking the temporary aid. Iowa’s largest teaching hospital — the University of Iowa Hospitals and Clinics — did not apply.

An IowaWatch analysis of Centers for Medicare & Medicaid Services data shows amounts for Iowa hospitals ranged from $92.8 million for MercyOne Des Moines Medical Center to $1 million for Sanford Medical Center in Rock Rapids.

Others of note included $76.6 million for UnityPoint Health-Iowa Methodist Center in Des Moines; $56.3 million for the Genesis Medical Center in Davenport; $55 million for MercyOne North Iowa Medical Center in Mason City; $41.7 million for Mercy Medical Center in Cedar Rapids; and $38.6 million for UnityPoint-St. Luke’s Hospital in Cedar Rapids.

The funds were part of $1.02 billion in accelerated and advance Medicare payments sent not only to Iowa hospitals, but to physicians, optometrists, chiropractors, psychiatrists, psychologists and other providers; facilities for skilled nursing and senior living; mental health care facilities; and others in the state.

The Medicare payment programs, separate from other aid health care providers received from programs such as the CARES Act and other COVID-19-related emergency plans, allowed providers who applied to receive in advance three months of anticipated Medicare billings.

Medicare distributed $100.3 billion nationwide before stopping the accelerated payments for re-evaluation, and then suspended advance payments in April because of other available funding.

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The 77 Iowa hospitals taking accelerated Medicare payments included 44 critical access hospitals with 25 or fewer beds and serving rural areas.

The rural hospitals could seek ahead of time up to 125 percent of their anticipated Medicare payments for a six-month period, rules for the program stated.

The UI Hospitals and Clinics, which has received roughly $49 million in CARES fund distributions for the hospital and its physicians, did not apply for the accelerated Medicare programs. Neither did many other hospitals.

Industry officials said in several IowaWatch interviews that some hospital leaders were skittish about the program’s payback plan.

The plan called for hospitals taking accelerated payments to credit Medicare for billings until the advance money is paid back, beginning 120 days after receiving funding. But those that cannot pay back the advances in full within specified time periods have to pay 10.25 percent interest on the balance.

The Centers for Medicare & Medicaid Services has told hospitals the Treasury Department set the double-digit interest rate and that it cannot waive or change it. The Treasury Department declined to respond to multiple requests from IowaWatch for comment.

Paying back the advance is doable but challenging, said Michael Topchik, national leader for the Chartis Center for Rural Health. It would be especially challenging for hospitals operating in the red with only a few days of operating cash on hand, he said.

“For them to pay that back, that will take them from a position of stabilizing that hospital to just putting them back right where they were, with feet to the fire,” Topchik said.

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Topchik said he and researchers at Chartis, part of the national health care delivery consulting firm iVantage Health Analytics, have heard the concerns about paying back the funds and, if stuck with it, the interest rate.

Hospitals’ financial performance played a key role in decisions whether to take the advance or not.

IowaWatch reviewed certified financial data for each Iowa hospital earlier this year and found that over 40 of the state’s 118 hospitals ended the last fiscal year for which they reported with a negative balance.

Most of the hospitals in that analysis are in rural regions but a few were short-term acute care hospitals in urban areas, IowaWatch found.

But even a larger hospital faces difficulty paying back accelerated payments, said Kirk Norris, president of the Iowa Hospital Association.

Norris said a hospital could pay back the payments but then end up having to furlough workers when Medicare money doesn’t come later.

Norris suggested that rural hospitals would survive COVID-19 financially if the accelerated payments became forgivable loans, but no congressional action is pending to do that.

“This whole thing has really been … as much about lost revenue as it has been expenses that you previously didn’t have,” Norris said.

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Revenue losses are expected to continue, he said. A large part of the reason is the loss of clinical procedures small hospitals normally rely on but which have been delayed or canceled while the hospitals deal with COVID-19.

Moreover, some patients are skipping or delaying medical checkups that produce hospital income because they wrongly fear going to the medical facility may not be safe. Or, they think a discomfort they feel is not serious enough to be checked, several hospital leaders and industry analysts told IowaWatch.

Mark Holmes, director of the Sheps Center for Health Services Research at the University of North Carolina, used mild heart attacks as one example. A lot of heart attacks can be mild enough that a person suffering it doesn’t feel compelled to go to a hospital.

“They might have stayed home,” Holmes said. “They might have died in their house and just never have seen the health care system, interacted with the health care system because they were too scared to go in.”

National stimulus efforts have included $175 billion in two initial rounds of CARES Act funding; another $10 billion for rural hospitals; payments of $12 billion in May and $10 billion in July for hospitals with high COVID-19 admissions; other distributions to safety net hospitals, children’s hospitals, assisted living facilities and nursing homes; and payroll protection plan payments for hospitals with 500 or fewer employees.

The Centers for Medicare & Medicaid Services suspended the accelerated program April 24 to re-evaluate its use and because of other revenue sources the federal government made available to health care providers.

The Iowa Center for Public Affairs Journalism-IowaWatch is a nonprofit, news website that collaborates with news organizations to produce explanatory and investigative reporting. Read more or support our journalism at www.IowaWatch.org. IowaWatch reporting in this project was made possible by support from the Solutions Journalism Network.

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