As documented through various news reports and articles, the healthcare industry has been overwhelmed by the first wave of coronavirus cases. Healthcare providers have struggled with performing necessary healthcare services as a result of several factors stemming from the lack of medical equipment (ventilators, etc.), medical supplies (including personal protective equipment), staffing and number of beds. A forgotten segment of the healthcare industry are federal qualified health centers (FQHC) and community health centers (CHC) (collectively, health centers), which are vital to providing healthcare to some of the most vulnerable patients in California and across the nation. Many FQHCs and CHCs have suffered huge losses in revenue in the recent weeks as the COVID-19 pandemic required them to stop most patient visits to limit the spread of the disease.


Impact of COVID-19 on Health Centers

The majority of the revenue generated by FQHCs and CHCs are from patient visits reimbursed by Medi-Cal (the Medicaid program in the State of California) and Medicare. The impact felt by health centers has been significant since the coronavirus hit the U.S. A survey performed by Health Resources and Services Administration (HRSA) in early April 2020 disclosed that approximately 1,640 health centers were temporarily closed nationwide. In addition, roughly 16 percent of their staff were unable to work due to facility closures, virus exposure/self-isolation, family/home obligations and lack of personal protective equipment, among other things.

At the same time 203 California-based health centers were temporarily closed and roughly 16 percent of their staff were unable to work.


Federal Relief Funding

However, actions taken by the Federal Government, including relief funding, has helped to partially supplement the revenue loss experienced by health centers.

On Jan. 31, 2020, the U.S. Department of Health and Human Services (HHS) declared a public health emergency, which allowed HHS to implement certain provisions that benefit healthcare providers (i.e., use of telehealth services).

On March 27, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act provides a $100 billion emergency fund administered by HHS (to remain available until expended) to prevent, prepare for and respond to coronavirus for necessary expenses to reimburse – through grants or other mechanisms – eligible healthcare providers for healthcare-related expenses or lost revenues that are attributable to the coronavirus. Recently, HHS announced that the first $30 billion of this emergency fund would be distributed to healthcare providers who had received Medicare Fee-For-Service Reimbursements in 2019.


HRSA Funding

On April 8, 2020, HHS (through HRSA) awarded more than $1.3 billion to 1,387 health centers as part of a historic U.S. response to the coronavirus disease. HRSA-funded health centers may use these awards to help detect coronavirus; prevent, diagnose and treat coronavirus; and maintain or increase health center capacity and staffing levels to address this public health emergency.


Telehealth and Medicare

The CARES Act includes provisions that allows for payment of telehealth services to Medicare patients furnished by a FQHC or rural clinic. Amounts paid for such telehealth services will be similar to the national average of payment rates for comparable telehealth services. This should be a significant aid to health centers, not just in the current crisis but going forward as well.

GHJ spoke with the chief executive officer of a Los Angeles-based FQHC who stated that their clinic struggled the first couple of weeks after the state of emergency was announced. All non-essential and non-urgent appointments were cancelled as a result of the state of emergency announcement. After the CARES Act allowed for reimbursement of telehealth services for Medicare patients furnished by FQHCs, their productivity was back to the 80 percent of pre-coronavirus pandemic levels for medical and behavioral health services. One key aspect to their success was the earlier implementation of telehealth services by this clinic.


Looking to the Future

The COVID-19 pandemic has created an unprecedented economic and operational crisis across the U.S. for health centers. The U.S. Government response through the signing into law the $2-trillion CARES Act to provide healthcare resources to fight COVID-19, as well as reignite the economy through various measures, has helped healthcare providers. However, health centers should continue to update their cash flow forecasts to account for various funding strategies, which should include various scenarios including new or reduced funding sources, staff reductions, increased healthcare costs and potential adjustments to federal grant funding for reduced costs that are funded by other sources.


Please reach out to GHJ’s COVID-19 Response Team if you have any questions as the firm has an experienced team of consultants specializing in cash-flow projections, strategy and operations consulting, and re-organizations. We are here to assist organizations to succeed in these very challenging times.

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Mark Kawauchi

Mark Kawauchi, CPA, is a managing director within GHJ’s Nonprofit Practice. Mark has more than 30 years of public accounting experience and is dedicated to GHJ’s nonprofit clients with a specialty in healthcare. In addition to performing audits and reviews, Mark enjoys being a business advisor to…Learn More