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Hazard Pay for Health Care Providers During COVID-19

This Bulletin is brought to you by AHLA’s Fair Market Value Affinity Group of the Hospitals and Health Systems Practice Group.
  • April 14, 2020
  • Ben Ulrich , VMG Health
  • Mallorie Holguin , VMG Health
  • Alex Wine , VMG Health

The escalating spread of the coronavirus (COVID-19) has gripped the world in a pandemic. As of April 13, over 1,870,000 cases and more than 116,000 deaths have been reported worldwide due to COVID-19, with over 558,000 cases and 22,000 deaths in the United States alone.[i] Cases across the nation have been increasing daily at exponential rates and health care systems are being overwhelmed with the mounting strain of curtailing the disease. As an emergency measure, the federal government has acted under section 1135 of the Social Security Act, waiving various regulatory requirements to assist with combating the outbreak. Some of these waivers include prior hospitalization requirements for coverage of a skilled nursing facility, limitations on the number of beds and length of stay at critical access hospitals, housing of acute care patients in distinct units, out-of-state provider licensing requirements, and provider enrollment requirements, among various others.[ii] As the demand for COVID-19 screening, testing, and intensive care grows, health care providers have become critically needed and, as such, face significant health risks of their own.
 

Securing Coverage During a Pandemic

 
Health care providers staffing the nation’s emergency departments, clinics, and hospitals are being exposed to potentially infected patients daily. This risk is exacerbated by a shortage of personal protective equipment (masks, gowns, etc.),[iii] which increases the likelihood that health care providers may contract the virus. Not unlike employees/contractors in other industries, being asked to take on these risks may necessitate premium compensation in certain circumstances. Whether that premium is warranted and to what degree heavily depends on the potential health and financial risks incurred by the provider and the financial sustainability of the hospital during this pandemic. Specifically, health systems and hospitals should consider the following when determining pay rates to providers being asked to care for COVID-19 patients:
 
  • Viable Options for Staffing: Given the drastic financial and operational impact health systems are undertaking during the pandemic, all existing or potential staffing options should be evaluated prior to considering pay premiums. Redeploying providers outside of their normal role (e.g. certified registered nurse anesthetists being redeployed from elective surgeries to provide ICU back-up) or leveraging telemedicine to triage patients may be viable options, among others.
  • Health Risk: The degree to which a provider is likely to contract the virus and the subsequent severity of the illness.
  • Surge / Out-of-Market Staffing: Whether the event requires higher levels of staffing than normal, increasing the market demand for providers and/or requiring providers to travel from out-of-market on a temporary basis to meet patient demand.
 
For a provider employed by a health care organization, the financial risks of being exposed may be somewhat mitigated by the Families First Coronavirus Response Act, which went into effect on April 1, 2020.[iv] However, given the potential risk of exposure and resulting self-quarantine period, the need for premium hazard pay to health care providers treating COVID-19 patients may arise. As the health care industry has not encountered a nationwide pandemic to this degree, referencing typical market data resources or compensation surveys will not capture the full degree of risk, burden, and potential practice disruption presented in treating COVID-19 patients.
 
While certain premium compensation rates may be sufficient to engage an employed provider to assist with the COVID-19 specific care plan, contracting independent providers to staff a clinic or unit may be more challenging. Due to the self-quarantine requirements post-infection, independent or self-employed providers may incur additional financial risk due to limited benefits and the risk of practice operational loss and thus may require a premium.
 
Even with wide adoption of premium pay in the industry for providers in more high-risk COVID-19 units, health systems and hospitals should still consider the financial feasibility of any hazard pay plan. To the extent that health systems are able to contract with providers without the inclusion of premium compensation, those staffing options should be considered as the best financial option to secure the services.
 

COVID-19 and Hazard Pay Premiums

 
For situations necessitating a pay premium, health systems can look to comparable pay premiums given for individuals facing significant risks conducting their job functions both within the health care industry and beyond. For instance, according to the U.S. Office of Personnel Management, federal employees may receive additional pay for the performance of hazardous duty or duty involving physical hardship. Specifically, a 25% hazard pay differential is authorized for employees working with… “[materials] of micro-organic nature which when introduced into the body are likely to cause serious disease or fatality and for which protective devices do not afford complete protection.”[v]
 
As COVID-19 has spread across the country and resources have been strained, premium pay has been necessary in certain circumstances both within and outside of the health care industry. Notably, as of March 30, 2020, delivery drivers and grocery store personnel in the U.S. have begun to strike, demanding hazard pay and sick leave during the COVID-19 outbreak, despite only an indirect risk of exposure.[vi] Within the health care industry, systems and hospitals have already begun implementing premiums for at-risk providers to meet the required demand. Specifically, nursing compensation premiums of over 50% above typical market rates have been observed for traveling nurses in Washington state.[vii] Additionally, hospitals meeting certain qualifying requirements are afforded additional protections from sanctions through blanket waivers issued under section 1135 of the Social Security Act. Per guidance published by the Centers for Medicare and Medicaid Services, these waivers can be applied in certain circumstances for payments to physicians above their previously contracted rate while providing services related to COVID-19 treatment.[viii]
 
Certainly, the financial impact of any pay increase should not be overlooked and needs to be carefully considered and prudently applied if warranted. With industry and governmental support for hazard pay premiums, health systems have an extra potential option to use at their discretion in curtailing the spread of the disease.
 
Ben Ulrich, CVA is a Managing Director with VMG Health and is based out of VMG Health's Dallas office. Mr. Ulrich can be reached at (972) 616-7798 or by e-mail at Ben.Ulrich@vmghealth.com.
 
Mallorie Holguin is a Manager with VMG Health and is based out of VMG Health's Denver office. Ms. Holguin can be reached at (720) 305-9319 or by e-mail at Mallorie.Holguin@vmghealth.com
 
Alex Wine is an Analyst with VMG Health and is based out of VMG Health's Denver office. Mr. Wine can be reached at (720) 305-9311 or by e-mail at Alex.Wine@vmghealth.com.