Since 05/11, Strata Decision Technology, a healthcare focused financial analysis & analytics enterprise software provider, has published a report that tracks volumes at 243 hospitals across the country. Strata recently changed their report to a bi-weekly (every second week) schedule to allow more data to accumulate in their reported trends. The latest report shows a continued rebound in outpatient volume thru the middle of June with the last 14-day volume, as of June 13th, up YoY by 7.6% and the past 30-days up 2.5% compared to 2019 levels.
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Since 05/11, Strata Decision Technology, a healthcare focused financial analysis & analytics enterprise software provider, has been publishing a weekly report that tracks volumes at 212 hospitals across the country. The latest report shows a continued rebound in outpatient volume thru the end of May with the last 7-day volume, as of May 30th, down YoY by ~1.5% vs. ~4% in the prior week. Strata also reports continued modest improvement in ER visits / inpatient admits / observation visits YoY at a reported -32% / -14% / -18% over the latest 7-day period vs. the prior week of -36% / -19% / -23% - see exhibit 1 on page 2. Additionally, IQVIA’s recent research shows that elective procedures remain at half of their pre-COVID volumes - more below. See our recent overview of utilization data points from last week here as well as our Hospital Recession Slides / Webcast for more details on our providers views. Please reach out to us for a copy of the model itself.
Since 05/11, Strata Decision Technology, a healthcare focused financial analysis & analytics enterprise software provider, has been publishing a weekly report that tracks volumes at 212 hospitals across the country. The latest report shows a continued rebound in outpatient volume in May with the last 7-day volume, as of May 23rd, only off 2019 volumes by ~4% vs. -14% in the prior week. At the same time, ER visits / inpatient admits / observations visits improved modestly y/y at a reported -36% / -20% / -23% over the latest 7-day period vs. the prior week of -42% / -25% / -30%. see exhibits 2 on page 3. Additional research from TransUnion Healthcare also show similar trends in volume, but further notes that reengagement behavior has differed across age groups. See our recent overview of utilization data points from last week here as well as our Hospital Recession Slides / Webcast for more details on our providers views. Please reach out to us for a copy of the model itself.
Since 05/11, Strata Decision Technology, a healthcare focused financial analysis & analytics enterprise software provider, has been publishing a weekly report that tracks volumes at 228 hospitals across the country. The latest report shows ER visits and inpatient admits declined by ~1-1.5% over the latest 7-day period as of May 16th, vs. ~-8% in the prior week, pointing to a slowing of ER / inpatient volume decline towards mid-May. Meanwhile, outpatient visits continued to increase w/w with ~3% volume growth over the latest 7-day period vs. +6% in the prior week. Over the last 30 days, ER visits were down ~1%, inpatient admits up ~3%, observation visits up ~13% and outpatient visits up ~23% - see exhibits 2 on page 3. Overall, hospital volume metrics appear to be stabilizing / improving towards mid-May albeit at a more moderate pace vs. what HCA, THC and UHS have communicated recently.
Following the reopening of states and the rescheduling of elective procedures, early hospital volume metrics have been improving in May. HCA, THC and UHS all provided metrics which indicate that volumes have begun to improve from their COVID induced April trough levels. While the early results are encouraging, managements have expressed caution in terms of visibility around volume improvement trends over time. Focus for hospitals largely continues to surround assuring patients of their safety and restoring confidence in resuming normal HC routines. Additionally, recent volume data provided by Strata Decision Technology (inpatient / outpatient volume), The Commonwealth Fund (ambulatory care volume) and AHCA (FL hospital capacity) all pointed to an improvement in May vs. the trough levels in April – more below. Overall, the directional improvement is not surprising, with the main question being if/when providers return to 100% of typical.
Yesterday (05/12/20), House Democrats unveiled a new $3T COVID-19 relief package which includes provisions to aid state fiscal budgets, support for providers, as well as significant COBRA subsidies. While many COVID-19 related provisions were built upon the provisions from the previous $2T stimulus package, the new package adds more health insurance protections, including full COBRA premium subsidies until Jan 31, given the continuing surge in the unemployment rate. According to Politico, the House is expected to vote as soon as this Friday, but the White House and Senate Republicans expressed there hasn’t been enough time since the last package to determine whether new legislation is necessary. Senate Majority Leader Mitch McConnell has said there is no “urgency” likely pushing any actions until after Memorial Day. Overall, while we expect there will absolutely be further stimulus, we expect there will be a robust debate on components and thus would not be investing on the assumption that the House bill in its entirety is what will eventually pass.
CMS released the Medicare FY2021 Hospital Inpatient Prospective Payment Systems (IPPS) proposed rule. Before accounting for Medicare Disproportionate Share (DSH) payments CMS estimates that industry rates would increase by 2.5%, with proprietary (for-profit) rates increasing by 2.6%. Rates for Rural hospitals (+2.3%) are slightly lower than Urban hospitals (+2.5%). Key drivers of the +2.5% include a market basket update of +3.0%, productivity cut worth -0.4%, documentation and coding benefit of +0.5% and other proposed adjustments worth -0.6%. CMS estimates that changes to uncompensated care / new technology add-on / capital payments will lower rates by 40ps. We would expect all-in reimbursement for the industry of +210bps and +220bps for the for-profits based on the proposed rule. These rates are slightly below the +340bps/+290bps seen by for-profit hospitals in FY19/FY20 but still solid in our view. See impact table on Page 2 Exhibit 1.
Hospital payer mix is a key determinant of economic results given employers pay 30-40% more than exchanges and 3x Medicaid in our view. With employer-based coverage clearly declining thru 2020 and into 2021 our recession model drives payer mix changes off estimated unemployment thru YE’21. In addition, our conversations with payers / providers have skewed increasingly toward concerns that utilization will take longer than expected to “normalize” despite clear pent up demand from deferrals. Our hospital recession model assumes utilization does not revert to 100% of “normal” until the second half of 2021, adding additional pressure to provider economics next year.
UHS reported 1Q20 adj EBITDA-NCI of $359M (-21.6% y/y) vs. WR / Consensus of $482M / $458B largely due to COVID-driven deferred utilization that began in mid-March as well as a $20M increase in general liability reserves. Cash revs were $2.83B (+0.9% y/y), $110M / $90M below WR / Cons of $2.94B / $2.92B. EBITDA missed our est. (unadjusted yet for COVID-19 – Hospital Recession Model coming soon – email us for our MCO recession model) by $100M ex professional liability reserve of $20M. While Acute revenue was similar vs. HCA as UHS SS Acute revs were +0.4% vs. HCA’s +1.2%, incremental margins on lost revs were worse. We est. incremental margins on ~$75M revenue miss at ~100% vs. HCA closer to 50% and look for discussion here on the call tomorrow. However, UHS has been cutting costs in 2Q and we would expect some moderation in incremental margins on lost revenues at that point. Behavioral was slightly weaker missing top-line by $30M and EBITDA by $15M.
Following the initial infusion of $30B earlier in the month, the administration has now laid out a plan for how to distribute the remaining $70B to providers. Same as the $30B initial infusion, $20B out of the $70B is general funding which will be distributed to all facilities & providers but importantly this time the fund will be allocated “so that the whole $50 billion general distribution is allocated proportional to providers' share of 2018 net patient revenue”. Recall that in order to quickly distribute the fund, HHS distributed the initial $30B based on 2019 Medicare FFS revs. This means that during this second round, providers with smaller % of revs from Medicare FFS (like children’s hospitals) will receive a greater proportion of the additional distribution compared to the last round. It is unclear at this point how the allocation methodology will impact the distribution to hospitals vs. the initial distribution but we plan to follow-up as we get more clarity here – see exhibit 1 on page 2 for our est. (HCA / DVA are actual) of $ providers received from the initial $30B distribution.
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