AMGA: CARES Funding Will Only Replace One Week of Revenue Lost

April 22, 2020
The lost revenue is largely the result of medical groups and integrated systems eliminating non-essential surgeries and procedures, and instructing patients to stay home

The estimates coming in on hospitals’ projected revenue losses during the COVID-19 pandemic continue to pile up. A new survey from AMGA reveals that two-thirds of integrated health systems say their initial share of payments from the Coronavirus Aid, Relief, and Economic Security (CARES) Act will replace less than one week of revenue lost.

The CARES Act, signed into law on March 27, provided $100 billion in relief to healthcare providers, but this latest survey demonstrates that, spread across the entire U.S. healthcare system, its impact has been minimal. AMGA estimates that it will take as much as $318 billion to replace just half of the revenues hospitals and physicians will lose over four months, and in a letter to the congressional leadership, AMGA asked Congress to provide these funds.

The survey of 71 of the nation’s leading integrated health systems was conducted April 15-19 by AMGA. Among the survey’s other findings:

• 40 percent of respondents say revenue has declined by more than half, with nearly all reporting declines of 25 percent or more

• 55 percent report having less than six months cash on hand

• 84 percent of healthcare systems have furloughed employees and 75 percent have cut physician salaries

AMGA reported last week that independent medical groups—multispecialty group practices not affiliated with a hospital—are in similar dire straits. An even greater number—about 60 percent—said they will deplete their cash reserves by summer.

The lost revenue is largely the result of medical groups and integrated systems eliminating non-essential surgeries and procedures, and instructing patients to stay home to avoid potential exposure to COVID-19. AMGA members reported the initial $30 billion of the $100 billion in relief funding provided less than a week’s revenues for health systems.

Fred Horton, president of AMGA Consulting, further detailed the financial situation, noting, “The average medical group has expenses (staff and overhead, but not including physician compensation) of about $33,000 per physician per month. This means even before paying the physicians, the practice will lose $23,000 per physician in the first month relief is received. If no more relief is forthcoming, the losses will grow to $33,000 per physician per month, or about $20 million for a 200-member practice over three-month period.”

AMGA based its request for an additional $318 billion for the Provider Relief Fund on the average 50 percent revenue loss its survey found. A full description of the methodology can be found in the letter to congressional leadership.

“Health systems are using every possible tactic to remain viable: furloughing employees, cutting salaries, exhausting reserves built up over decades, and accessing commercial loans,” said AMGA President and CEO Jerry Penso, M.D., M.B.A. “Despite these measures, some groups and systems clearly are at risk to close. The financial challenges for providers aren’t going away in the short term, and we need Congress to provide support that better aligns with that reality.”

Penso added, “Closure of any large medical group or health system would have a destructive, long-term impact on the health and financial wellbeing of the communities they serve. Patients, particularly those with chronic conditions or needing specialists, would be unable to access needed care, resulting in increased hospitalizations and further stressing an already overburdened healthcare system.”

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