Update on the Nation’s Health Care Sectors in the Time of COVID-19

Staying abreast of changes in the health care landscape during the COVID-19 pandemic can challenge even the closest observer. While some facilities can barely keep pace with the influx of new patients, many hospitals and medical groups face steep losses as a result of temporary closures and cancelled procedures. Supply chains are severely strained and even the best plans for risk containment failed to anticipate the demands of this pandemic. While COVID-19 and it effects are temporary, many changes being put in place today are likely to remain long after the pandemic is over.

Here are some key areas to watch:

CARES Act – Public Health and Social Services Emergency Fund

On April 10, 2020 the Department of Health and Human Services (HHS) announced it was pushing out to providers the initial $30 billion out of $100 billion earmarked from the Public Health and Social Services Emergency Fund. To determine how much each provider received, HHS used a basic formula of its 2019 Medicare FFS payments as a percent of total 2019 Medicare FFS payments ($484 billion) times $30 billion.

By doing so, HHS created a windfall for hospitals that have not experienced a surge of COVID-19 care, while those on the front line of COVID-19 have costs far exceeding reimbursement. Even with the additional 20% reimbursement for COVID-19 patient care, numerous hospitals are burning through cash reserves. Future funding rounds for the remaining $70 billion are expected to be allocated more equitably as a result of adjustments to the basic formula.

Long-Term Payment Reform

In the long-term, hospital operators will seek payment reform so that they will be better prepared for future surges with space, beds, staff, equipment, supplies and medication. To that end, the shortage of personal protective equipment (PPE) is very top of mind as this public health emergency (PHE) has demonstrated a need to address weaknesses in this area of the supply chain. Hospitals are having to compete with the private sector and non-patient care entities to procure PPE the staff and patients require. In the near-term, organizations such as the American Hospital Association are implementing strategies such as the 100 Million Mask Challenge to help PPE supply efforts.

Hospital M&A

The 2019 trend of distressed hospital M&A activity is expected to continue for systems and investors in the right position. Hospitals that were distressed or facing bankruptcy prior to the PHE – approximately 25% of US hospitals operate in the red – are likely now worse off and such transactions would make sense. This is creating a buyer’s market, albeit the pool of buyers may take a different approach.

In terms of due diligence during and post-PHE, a new major question will be: how did the target respond to COVID-19? Buyers and partners will want to know how management prepared and executed care for COVID-19 patients. From a valuation perspective, it will be interesting to see how these qualitative assessments will impact transactions.

Physician Practices

Recent updates in the area of physician practices are as follows:

  • Practices have started receiving funds from CARES Act loans and grants with more expected to come in the “phase IV” negotiations. This includes the forgivable SBA Payroll Protection Program and Economic Injury Disaster Loans.
  • For independent physicians and providers whose practices have slowed down, there are naturally questions about selling practices and/or seeking employment. A recent primary care physician survey points to the challenges, noting 20% expect to close.
  • The temporary pause of elective services has certainly impacted many specialty physicians. Over the last several days, certain states including Texas, Oklahoma and Alaska have announced plans to allow certain procedures. CMS and AHA have also provided guidance on resuming elective services, both highlighting the need for 14 days of sustained reduction of COVID-19 in the service area.
  • Larger medical groups and systems are collaborating with independent providers to help guide the outlook for care in their respective service areas for the next two to six months.


For hospitals and care givers billing Medicare, the telehealth reform by CMS has empowered the industry tremendously. As a result, transaction activity around telehealth services has accelerated during the PHE.

Certain highlights in effect during the PHE are:

  • CMS added approximately 80 telehealth services that can be billed from March 1, 2020 until the end of the declared PHE. Categories include, but are not limited to, emergency department visits, inpatient care, critical care (including NICU and pediatrics), nursing facility visits, home visits, psych/neuropsych testing, therapy services (including physical, occupational and speech), ESRD, and radiation therapy management.
  • CMS has increased reimbursement for telehealth services to the same levels as in-person care when including CPT telehealth modifier 95 as the point-of-service.
  • Physician supervision rules for advanced practice providers have also been changed to allow for broader telehealth coverage.
  • Big data and AI have been integrated with telehealth services so systems can identify and proactively communicate with the most at-risk population.
  • Mental health services during the PHE are in high demand and are being made more widely available through telehealth.

Industry experts predict that it will be difficult for CMS to walk-back these reforms which demonstrate that telehealth utilization can work. However, to be viable long-term, telehealth reimbursement from private payors must be addressed.

At this point, positive achievements in responding to COVID-19 include success in telehealth reform and swift disbursements of funds through the CARES Act, other federal programs and the private sector. Negative signs are too little or uneven allocation of funds to providers and ongoing supply chain challenges.

For information about how Weaver and our team of health care industry professionals can assist your business during this time of change, please contact us. To learn more about all the services Weaver offers, visit weaver.com/services.

© 2020


Curt Germany

Curt Germany

Partner-in-Charge, Valuation Services


Curt Germany, Jr., CVA, who was a managing director and member of the management committee at HSSK until its merger with Weaver…

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