H2C INDUSTRY INSIGHTS
 

Did Capitated Revenue Give Health Systems an Edge During the Pandemic?
H2C Analysis Suggests ‘Yes’

By Michael Tierney & EJ Salamone
April 22, 2021

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H2C is a wholly owned subsidiary of Fifth Third Acquisition Holdings, LLC and an indirect subsidiary of Fifth Third Bank, National Association. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit.

Footnote:

1. Daly, R., “Hospitals with Health Plans Have Gotten a Financial Boost During the Pandemic,” HFMA News, July 24, 2020.

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As volumes for hospitals and health systems fell throughout the pandemic, rating agencies speculated that organizations with capitated revenue from provider-sponsored health plans (“PSHPs”) and or capitation agreements would benefit from financial stability . The reason: Even as these organizations faced decreased revenue from postponed elective procedures, such pressures would be balanced by the cash flow of their PSHP, projected to reach all-time highs.

 

An H2C Securities Inc. (“H2C”) analysis aligns with that view, as PSHPs helped health systems weather the financial storm of COVID-19.

 

H2C analyzed the performance of the 25 largest not-for-profit health systems in the United States before and during the pandemic, comparing quarterly performance from Q1 2019 through Q3 2020. As part of the analysis, H2C measured PSHP premiums and capitation revenue as a percentage of each system’s total revenue by quarter during the defined period.

H2C’s analysis highlights that the membership-based structure of a health plan provides a reliable stream of revenue, and when combined with lower costs when members elect not to receive care under the plan, effectively offset reduced volumes and utilization during the pandemic.

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