COVID-19 has wreaked havoc on the worldwide economy in 2020. The senior care and housing industry has taken a severe financial hit with declining census, shifting payor mix, a staffing crisis, a shortage of critical supplies, and increased scrutiny from regulators and the media. Suddenly, communities with already razor-thin margins are facing extreme shortages in cash flow that threaten long-term solvency. Industry operational and financial leaders have been forced to shift from budget variance management to cash flow survival mode.
Cash flow is of utmost importance as the pandemic disrupts census and preferred payor mix. Most annual budgets have been blown to pieces during the pandemic. Attention to budget variances has taken a backseat to simply day-to-day survival. It is critical to evaluate operations to determine the major financial risk factors and take proactive measures to reduce the impact of these areas of risk.
Preparing budgets for FY 2021 is also proving to be a significant challenge and may end up being an exercise in futility if the pandemic lingers on. It is wise to place a greater emphasis on cash flow to partially compensate for lost revenues.
Extra emphasis is needed on revenue cycle activities, in particular billing and collections, to ensure every penny you are entitled to comes in the door as soon as possible. Communities cannot afford to let accounts receivable drag out and incur bad debt write-offs. The business office is more important than ever during these difficult times.
A thorough understanding of telemedicine billing requirements and waivers, such as the three-day prior hospital stay for Medicare-covered skilled nursing facility services, is important to ensure claims are paid timely and accurately and that the waivers are used appropriately. In addition, ancillary service contracts, such as therapy, as well as outdated Medicare Advantage contracts, should be reviewed to make sure expenses and revenues reflect the new realities and to uncover opportunities for cost savings and revenue generation.
The pressure on the supply chain for personal protective equipment (PPE) and testing resources is immense. Budgets are out the window as communities go into survival mode to protect their residents and employees. Strict cash management is necessary to provide resources for purchasing adequate supply reserves—not only to cope with the current pressures, but for the potential second wave of COVID-19 cases.
Congress and other federal agencies have made available much needed federal funding and have provided other means of financial relief. Unfortunately, the execution of the distribution of these funds has been very slow, and the application and reporting requirements are confusing and cumbersome.
Many relief funds have very specific requirements that must be met in order to qualify for funding. It is important for organizations to summarize the funds received from federal relief programs and track them against projected losses and additional expenses to ensure funding conditions are met. In addition, careful attention should be paid to ensure funds are accounted for properly from a revenue recognition standpoint.
Throughout each month, any expenses such as additional labor hours, training, and PPE related to COVID-19 should be tracked. At the end of the month, lost revenue related to COVID-19 should be computed, and the amount of stimulus revenue to book can be computed by adding the lost revenue to the COVID expenses.
HDG strongly recommends that communities take full advantage of the Medicare and Medicaid cost report deadline extensions to review cost report mapping and allocation statistics. This step will ensure cost-based reimbursement rates are maximized.
Additionally, to assist our clients, managed communities, and other providers in preparing for and responding to COVID-19, Health Dimensions Group created a Skilled Nursing & Senior Living COVID-19 Response & Resource Guide that is available for your download and use.