Postponing Elective Surgeries to Contain COVID-19 Spread and Conserve Resources Presents Challenges for Healthcare Providers

The World Health Organization (WHO) declared the COVID-19 pandemic on March 11, 2020.[1] As a result, there are more patients in need of immediate and attentive care, and many practices now have to consider how to continue providing necessary services while containing the spread of COVID-19 with balancing current and future needs for clinician services, medical supplies and access to personal protective equipment (PPE).  In response to this, the Centers for Disease Control and Prevention have recommended the postponement of non-essential adult elective surgeries and medical and surgical procedures to conserve resources,[2] and the Centers for Medicare & Medicaid Services (CMS) and the American College of Surgeons (ACS) have provided guidelines for same.[3]  Factors to be considered include patient risk factors, availability of beds, the number of staff and PPE, as well as urgency of the procedure.[4]

On March 19, 2020, California Governor Gavin Newson issued an executive order directing all individuals to stay at home except as needed to maintain critical infrastructure sectors such as healthcare facilities.[5]  This order also provided that “healthcare delivery systems shall prioritize services to serving those who are sickest and shall prioritize resources, including [PPE], for the providers providing direct care to them.”[6]  While the order does not prohibit elective procedures, the California Department of Public Health has noted under its Frequently Asked Questions that “non-essential medical care like eye exams, teeth cleaning, and elective procedures must/should be canceled or rescheduled.  If possible, health care visits should be done remotely.” [7]  Moreover, certain city and county public health departments have issued orders to postpone routine medical appointments, elective surgery procedures and in-person routine counseling.[8]

Federal Financial Relief for Qualified Healthcare Providers

Postponing or canceling elective surgeries and non-essential medical and surgical procedures are necessary during these unprecedented times, but it certainly creates financial challenges for providers.  To assist with the public health and economic impacts of COVID-19, the Coronavirus, Aid, Relief and Economic Security (CARES) Act[9] provides a $2.2. trillion federal aid package that includes the following financial assistance to healthcare providers:

  • $100 billion to the Public Health Social Services Emergency Fund (PHE Fund) to reimburse eligible healthcare providers for healthcare-related expenses or lost revenues not otherwise reimbursed that are attributable to COVID-19; and
  • $349 billion for the Small Business Administration (SBA) to provide up to $10 million in forgivable loans per small business as part of the Paycheck Protection Program (PPP).[10]

However, there are limitations on who may qualify for assistance under the CARES Act, as well as a need for further clarification from the federal government regarding the terms and conditions.

1. PHE Fund

The initial $30 billion of the PHE Fund was distributed to providers and facilities beginning April 10, 2020.  These funds are considered payments, not loans, and therefore do not need to be repaid. They are intended to stabilize hospital finances as they face short-term revenue reductions and increased costs for items like PPE and personnel.  However, the following limitations apply:

  • The Secretary of the Department of Health and Human Services (HHS) has broad discretion in distributing funds, and initial funds were distributed only to hospitals and providers who received 2019 Medicare fee-for-service reimbursements, without any consideration of coronavirus-related financial impact.
  • To qualify, providers must currently provide care for patients with possible or actual cases of COVID-19, thereby leaving out certain healthcare providers who nevertheless are affected by the cessation in elective and non-essential medical care.
  • Some of the funds will cover providers’ costs of delivering care for uninsured COVID-19 patients, but providers are prohibited from collecting out-of-pocket payments from the patient that are greater than what the patient would have paid to an in‑network provider.
  • Allocated funds may not be used to reimburse for losses that other sources are obligated to reimburse.
  • Within 30 days of receiving payment, providers must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment. Providers who do not agree with the terms and conditions must contact HHS within 30 days to remit the full payment; however, HHS has not provided instructions or identified a contact person for this purpose. This is problematic because not returning the payment within 30 days of receipt is considered an acceptance of the terms and conditions.
  • The funds are intended to be used to support healthcare related expenses or lost revenue attributable to COVID-19. Though the parameters are not clearly delineated, HHS indicates that funds are intended to “provide relief to both providers in areas heavily impacted by the COVID-19 pandemic and those providers who are struggling to keep their doors open due to healthy patients delaying care and cancelled elective services.” [11]

Of note, given the concerns regarding hospitals and their capacity for treating COVID-19 patients, CMS has issued temporary new rules permitting hospitals to transfer patients to outside facilities such as ambulatory surgery centers (ASCs) while still receiving hospital payments under Medicare.[12]  As such, ASCs may now contract with local healthcare systems to provide hospital services, or they can enroll and bill as hospitals during the emergency declaration, as long as doing so is not inconsistent with their State’s Emergency Preparedness or Pandemic Plan.[13]  Therefore, ASCs likely qualify for financial assistance under the PHE Fund.

2. PPP Loans

The PPP is a loan designed to provide a directive incentive for small businesses to keep their workers employed and on the payroll.[14]  Businesses with no more than 500 employees, or who otherwise meet applicable SBA employee-based size standards,[15] may apply for a PPP loan to assist with cash flow. While this excludes most hospitals, certain physician practices and ASCs may qualify. The following conditions apply:

  • The maximum loan amount per business is $10 million.
  • Application is restricted to small businesses and organizations that were harmed by COVID-19 between February 15, 2020 and June 30, 2020.
  • The loan only covers up to 8 weeks of payroll, rent, mortgage, interest or utilities.
  • The loan is forgiven if all employees are kept on the payroll for 8 weeks and the money is used for qualified expenses. Any portion of the loan that is not forgiven is subject to a maximum term of 10 years with a maximum interest rate of 4%.
  • Payroll costs are capped at $100,000 on an annualized basis for each employee. [16]

3. Other Financial Assistance

Finally, healthcare businesses will also get billions of dollars in additional funding not directly related to the COVID-19 pandemic.  For example, hospitals will take in at least $3 billion more due to a temporary suspension of a 2% cut in Medicare fees from May 1, 2020 to December 31, 2020, and more than 3,000 hospitals will share in an $8 billion windfall through the stimulus provision that reverses cuts in their Medicaid payments for 2020 and 2021.[17]  Separately, CMS is delivering close to $34 billion in loans through the expansion of its Accelerated and Advance Payment Program for Medicare providers, with the funds being distributed based on Medicare fee-for-service revenue.  However, these payments are available only to Part A providers, including hospitals, and Part B suppliers, including doctors, non-physician practitioners and durable medical equipment suppliers.

California Assistance to Healthcare Providers During COVID-19

In addition to federal assistance, California is offering the following resources to help alleviate the financial burden healthcare providers are facing during this time:

  • Allocation of $50 million to the California Infrastructure and Economic Development Bank for loan guarantees to small businesses to help eliminate barriers to capital for those individuals who do not qualify for federal funds;
  • Allowing small businesses to defer payments of sales and use taxes of up to $50,000, for up to 12 months; and
  • A signed executive order that provides a 90-day extension for tax returns and tax payments for all businesses filing a return for less than $1 million in taxes. [18]

The aforementioned resources should assist providers who have seen a sharp increase in the costs of preparation for the pandemic as well as a steep decline in revenue as a result of postponing or canceling scheduled elective surgeries and non-essential medical and surgical procedures.

What Next?

Despite some financial assistance, healthcare entities continue to feel the impact of COVID-19 on their workers, patients, infrastructure and bottom line.  As additional funding is rolled out under the CARES Act in the upcoming weeks and more funding is considered by the federal and state governments, hospital groups are focusing their advocacy on the following issues:

  • Assistance for providers with high rates of uncompensated care and Medicaid reimbursement since the initial $30 billion CARES distribution was based on a provider’s participation in Medicare, which disadvantaged providers disproportionately treating low-income patients;
  • Prioritizing hospitals and other healthcare providers that are dealing with a disproportionately large number of COVID-19 patients in the next $70 billion CARES distribution;
  • Additional funding ($100 billion) for the PHE Fund to assist the expansion of care to uninsured COVID-19 patients, as well as assisting providers that do not directly provide treatment to COVID-19 patients;
  • Additional support for rural providers by ensuring that government-owned rural providers can access small business assistance, as well as prioritizing rural providers in the next $70 billion CARES distribution; and
  • Funding for providers with a smaller share of payment from Medicare fee-for-services, such as children’s hospitals and hospitals with a high percentage of payments under the Medicare Advantage program.[19]

This is in line with what the federal government has indicated will be priorities for the remaining $70 billion CARES distribution.[20]  It is clear that the fight against COVID-19 is only beginning, and that additional assistance is required to allow healthcare providers to continue providing necessary care to COVID-19 patients while delaying or canceling medical procedures for other patients.

[1]     WHO Director-General's Media Briefing (March 11, 2020).

[2]     CDC Healthcare Facility Guidance.

[3]     CMS: Non-Emergent, Elective Medical Services, and Treatment Recommendations; ACS: Clinical Issues and Guidance on Non-Emergent Operations.

[4]     Id. 

[5]     California Executive Order N-33-20.

[6]     Id.

[7]     CDPH: Frequently Asked Questions re COVID-19.

[8]     San Francisco Department of Public Health Order of the Health Officer No. C19-08.

[9]      H.R. 748 - CARES Act.

[10]   NPR: What's Inside the Senate's $2 Trillion Coronavirus Aid Package.  

[11]   See, HHS.gov: HHS to Begin Immediate Delivery of Initial $30 Billion of CARES Act Provider Relief Funding; HHS: Remarks at White House Coronavirus Press Briefing (April 3, 2020); and HHS: CARES Act Provider Relief Fund.

[12]   CMS: Sweeping Regulatory Changes to Help U.S. Healthcare System Address COVID-19 Patient Surge.

[13]   Id.; see also Ambulatory Surgery Center Association: Expanding COVID-19 Response Under Federal Emergency Rules.

[14]   SBA: Paycheck Protection Program Loan Information.

[15]   SBA Size Standards for Small Businesses.

[16]   AMA: H.R. 748, the "Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Health Care Highlights; U.S. Treasury: Paycheck Protection Program Information Sheet.

[17]   COVID-19 Bonanza: Stimulus Hands Health Industry Billions Not Directly Related to Pandemic.

[18]   Governor Newsom Announces New Help for Small Businesses & Workers Displaced by COVID-19 (April 2, 2020); California Executive Order N-40-20.  

[19]   Modern Healthcare: Hospital group float new wish lists for funds flowing from Washington.

[20]   HHS: Cares Act Provider Relief Fund (Priorities for the Remaining $70 Billion).

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