Citizens Healthcare Sector Insights

May 28, 2020

Market Update May 2020

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Hospitals are currently playing the most important role in the battle against COVID-19. As hospitals and health systems flex their capacity to manage the expected surge in COVID-19 patients, these entities are also grappling with financial pressure given the lower reimbursed payments for COVID-19 patients vs. traditional elective procedures. Hospitals are evaluating the expected cash inflow from the CARES Act, PPP and Health Care Enhancement Act, as well as state stimulus to help improve liquidity. With that said, for those hospitals that were in weak financial position prior to the pandemic, these stimulus measures may not be enough to counter reduced procedure volumes.

The halt in elective procedures is also putting pressure on many physician groups and other facilities. However, new federal guidelines, including from CMS, are prioritizing the resumption of elective procedures when states rollback stay-at-home protocols. Healthcare providers are eager to begin working through the backlog of procedures, but the lasting effects of social distancing and potential for sustained elevated unemployment may result in some long-term demand disruption for some surgeries that are more truly “elective.”

One of the biggest systematic changes brought about as a result of the pandemic is the accelerated adoption of telehealth. Payers (Medicare and MCOs) have altered reimbursement payments to accommodate telehealth (in many cases reimbursement for telehealth visits reimbursed in line with in-person evaluation). Many healthcare constituents believe the heightened use of telehealth is here for the long-term for many specialties.

The importance of biopharma in developing COVID-19 treatments has generated significant goodwill for the overall industry, following a period of governmental pressures and general scrutiny over drug pricing practices. There are ~125 vaccines now in preclinical/clinical development for COVID-19, with at least 8 candidates already in clinical trials. In addition to vaccines, there are ~200 potential treatments under development. Select types of potential therapies include antibodies, antivirals, cell based therapies and RNA based treatments, among others.

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