Second quarter provider, carrier finances show rebound in revenue after shock of COVID-19 utilization decline

The Oregon Health Authority (OHA) released new data analysis showing how COVID-19 impacted the health care system during the first half of 2020.  

Data show that hospitals and other providers saw a large decline in utilization during the late spring, which led to significant drops in revenue. Drops in utilization led to fewer payouts for coordinated care organizations (CCOs) and commercial insurers, both of which ended the quarter with increased revenue compared to 2019.

For providers, federal CARES Act, Paycheck Protection Program and other funding helped offset lost revenue. Hospitals’ revenues were stabilized with an estimated $436 million in CARES Act funding in Q2. Other providers, including behavioral health and primary care, indicated in a survey that their financial difficulties were only partially addressed by federal funding programs.

“Federal funding cushioned the financial shock of the first part of the COVID-19 crisis, allowing the health care system to weather that part of the storm,” said OHA Director Patrick Allen. “As we face a new wave of COVID-19 cases, the urgency of the need for further federal support for our health care system is clear.”

Utilization data on the number of health care services provided show that in March and April, hospitals and other health care providers were facing a difficult set of circumstances, with many clinics closed, elective procedures on hold and Oregonians largely delaying or forgoing care. For instance, compared with the first two quarters of 2019 hospitals saw:

And according to a survey conducted by the Larry A. Green Center in partnership with the Primary Care Collaborative that has been fielded weekly since March 2020, roughly 70% of primary care providers in Oregon saw a decrease in patient volume by more than half. CCOs and commercial insurers noted these decreases in member utilizations as well.

But after hitting lows in April, utilization largely rebounded toward more normal levels in May and June across providers and hospitals.

Due to the utilization drops, providers’ revenues dropped sharply in March and April before federal funding along with state-led stabilization efforts took hold and utilization rebounded. Federal funding supports derived from both the CARES Act and the Paycheck Protection Program, along with state-led stabilization, efforts filled the breach for providers.

Hospitals received substantial federal financial support – largely through the CARES Act. Oregon data shows CARES Act funds contributed to an increase in other operating revenue of $436 million (+237%) from the first quarter. And answers to a a detailed question in the primary care provider survey indicated that “half of Oregon primary care providers received support from the Payroll Protection Program, and more than 40% reported ‘other’ financial support, which may reflect Provider Relief Funds from the CARES Act.”

At the same time OHA released nearly $100 million in quality payments to CCOs for provider support as well as suspending the 2020 quality pool withhold. These boosts, along with the subcapitation and other value-based payment arrangements between CCOs and providers, gave additional stability to provider finances.

CCOs themselves were affected by the postponement of elective medical procedures and members’ delaying care. In April CCOs’ total payments for services decreased 25%, but by June the decline in payments rebounded to within 10% of the pre-COVID-19 average. CCOs’ finances were also impacted as membership increased approximately 7% in Q2, as members were no longer allowed to be disenrolled from OHP in most circumstances and as more individuals became eligible for Medicaid. Increased enrollment resulted in CCOs’ increased operating revenue and played a role in increased member service expenditures.

According to DCBS reports, commercial carriers’ net premium income increased 6% and medical spending decreased nearly 4% as compared to January to June 2019.

It is possible that if more individuals access health care in the second half of 2020, carriers will see an uptick in hospital and medical spending.

“We are closely tracking the financial health and viability of our health care system as we move through this pandemic,” said Jeremy Vandehey, OHA’s director of health policy and analytics. “Across the system, our health care partners performed admirably in a crisis with the help they received from the federal government, CCOs, and other partners.

“While hospitals received significant aid, primary care, behavioral health and other smaller provider groups received less help and we remain concerned about providers on the front lines of this crisis. This data shows the need for ongoing federal support as cases increase, especially for providers who couldn’t easily access previous support. It also further illustrates the need to move to value-based payment models that are not tied to the number of visits to a providers office.”

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