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The financial challenges caused by the COVID-19 pandemic have forced hundreds of hospitals across the nation to furlough, lay off or reduce pay for workers, and others have had to scale back services or close.
Lower patient volumes, canceled elective procedures and higher expenses tied to the pandemic have created a cash crunch for hospitals. U.S. hospitals are estimated to lose more than $323 billion this year, according to a report from the American Hospital Association. The total includes $120.5 billion in financial losses the AHA predicts hospitals will see from July to December.
Hospitals are taking a number of steps to offset financial damage. Executives, clinicians and other staff are taking pay cuts, capital projects are being put on hold, and some employees are losing their jobs. More than 260 hospitals and health systems furloughed workers this year and dozens of others have implemented layoffs.
Below are 11 hospitals and health systems that announced layoffs since Sept. 1, most of which were attributed to financial strain caused by the pandemic.
1. NorthBay Healthcare, a nonprofit health system based in Fairfield, Calif., is laying off 31 of its 2,863 employees as part of its pandemic recovery plan, the system announced Nov. 2.
2. Minneapolis-based Children’s Minnesota is laying off 150 employees, or about 3 percent of its workforce. Children’s Minnesota cited several reasons for the layoffs, including the financial hit from the COVID-19 pandemic. Affected employees will end their employment either Dec. 31 or March 31.
3. Brattleboro Retreat, a psychiatric and addiction treatment hospital in Vermont, notified 85 employees in late October that they would be laid off within 60 days.
4. Citing a need to offset financial losses, Minneapolis-based M Health Fairview said it plans to downsize its hospital and clinic operations. As a result of the changes, 900 employees, about 3 percent of its 34,000-person workforce, will be laid off.
5. Lake Charles (La.) Memorial Health System laid off 205 workers, or about 8 percent of its workforce, as a result of damage sustained from Hurricane Laura. The health system laid off employees at Moss Memorial Health Clinic and the Archer Institute, two facilities in Lake Charles that sustained damage from the hurricane.
6. Burlington, Mass.-based Wellforce laid off 232 employees as a result of operating losses linked to the COVID-19 pandemic. The health system, comprising Tufts Medical Center, Lowell General Hospital and MelroseWakefield Healthcare, experienced a drastic drop in patient volume earlier this year due to the suspension of outpatient visits and elective surgeries. In the nine months ended June 30, the health system reported a $32.2 million operating loss.
7. Baptist Health Floyd in New Albany, Ind., part of Louisville, Ky.-based Baptist Health, eliminated 36 positions. The hospital said the cuts, which primarily affected administrative and nonclinical roles, are due to restructuring that is “necessary to meet financial challenges compounded by COVID-19.”
8. Cincinnati-based UC Health laid off about 100 employees. The job cuts affected both clinical and non-clinical staff. A spokesperson for the health system said no physicians were laid off.
9. Mercy Iowa City (Iowa) announced in September that it will lay off 29 employees to address financial strain tied to the COVID-19 pandemic.
10. Springfield, Ill.-based Memorial Health System laid off 143 employees, or about 1.5 percent of the five-hospital system’s workforce. The health system cited financial pressures tied to the pandemic as the reason for the layoffs.
11. Watertown, N.Y.-based Samaritan Health announced Sept. 8 that it laid off 51 employees and will make other cost-cutting moves to offset financial stress tied to the COVID-19 pandemic.
A complete financial recovery for many organizations is still far away, findings from Kaufman Hall indicate.
For the past three years, Kaufman Hall has released annual healthcare performance reports illustrating how hospitals and health systems are managing, both financially and operationally.
This year, however, with the pandemic altering the industry so broadly, the report took a different approach: to see how COVID-19 impacted hospitals and health systems across the country. The report’s findings deal with finances, patient volumes and recovery.
The report includes survey answers from respondents almost entirely (96%) from hospitals or health systems. Most of the respondents were in executive leadership (55%) or financial roles (39%). Survey responses were collected in August 2020.
FINANCIAL IMPACT
Findings from the report indicate that a complete financial recovery for many organizations is still far away. Almost three-quarters of the respondents said they were either moderately or extremely concerned about their organization’s financial viability in 2021 without an effective vaccine or treatment.
Looking back on the operating margins for the second quarter of the year, 33% of respondents saw their operating margins decline by more than 100% compared to the same time last year.
Revenue cycles have taken a hit from COVID-19, according to the report. Survey respondents said they are seeing increases in bad debt and uncompensated care (48%), higher percentages of uninsured or self-pay patients (44%), more Medicaid patients (41%) and lower percentages of commercially insured patients (38%).
Organizations also noted that increases in expenses, especially for personal protective equipment and labor, have impacted their finances. For 22% of respondents, their expenses increased by more than 50%.
IMPACT ON PATIENT VOLUMES
Although volumes did increase over the summer, most of the improvement occurred in areas where it is difficult to delay care, such as oncology and cardiology. For example, oncology was the only field where more than half of respondents (60%) saw their volumes recover to more than 90% of pre-pandemic levels.
More than 40% of respondents said that cardiology volumes are operating at more than 90% of pre-pandemic levels. Only 37% of respondents can say the same for orthopedics, neurology and radiology, and 22% for pediatrics.
Emergency department usage is also down as a result of the pandemic, according to the report. The respondents expect that this trend will persist beyond COVID-19 and that systems may need to reshape their business model to account for a drop in emergency department utilization.
Most respondents also said they expect to see overall volumes remain low through the summer of 2021, with some planning for suppressed volumes for the next three years.
RECOVERY MEASURES
Hospitals and health systems have taken a number of approaches to reduce costs and mitigate future revenue declines. The most common practices implemented are supply reprocessing, furloughs and salary reductions, according to the report.
Executives are considering other tactics such as restructuring physician contracts, making permanent labor reductions, changing employee health plan benefits and retirement plan contributions, or merging with another health system as additional cost reduction measures.
THE LARGER TREND
Kaufman Hall has been documenting the impact of COVID-19 hospitals since the beginning of the pandemic. In its July report, hospital operating margins were down 96% since the start of the year.
As a result of these losses, hospitals, health systems and advocacy groups continue to push Congress to deliver another round of relief measures.
Earlier this month, the House passed a $2.2 trillion stimulus bill called the HEROES Act, 2.0. The bill has yet to pass the Senate, and the chances of that happening are slim, with Republicans in favor of a much smaller, $500 billion package. Nothing is expected to happen prior to the presidential election.
The Department of Health and Human Services also recently announced the third phase of general distribution for the Provider Relief Fund. Applications are currently open and will close on Friday, November 6.
Here are eight health systems with strong operational metrics and solid financial positions, according to reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.
1. Minneapolis-based Allina Health has an “AA-” rating and stable outlook with Fitch. The health system has a strong financial profile and is the acute care leader in the broad Twin Cities metro area, Fitch said. The credit rating agency said Allina’s proven ability to rebound quickly from operating challenges supports the stable outlook.
2. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. The system has strong operating margins and is the leading pediatric provider in the Atlanta area, Moody’s said. The credit rating agency expects Children’s Healthcare of Atlanta to continue to generate robust margins and maintain exceptional liquidity while undergoing a new campus expansion project.
3. La Crosse, Wis.-based Gundersen Health System has an “AA-” rating and stable outlook with Fitch. The health system has consistently strong operating performance, strong balance sheet metrics and a low debt burden, Fitch said. The credit rating agency said Gundersen’s rating continues to be supported by its leading market position and expanding operating platform.
4. Houston Methodist has an “AA” rating and stable outlook with S&P. The system, which comprises an academic medical center and six community hospitals, has a strong enterprise profile and a history of excellent margins and cash flow, S&P said. The credit rating agency said Houston Methodist is well positioned to withstand the pressures from COVID-19.
5. Indianapolis-based Indiana University Health has an “AA” rating and stable outlook with Fitch. The health system has a solid balance sheet and strong operating cash flow despite short-term pressure from the COVID-19 pandemic. The credit rating agency expects IU Health’s EBITDA margins will range between 12 percent and 14 percent annually when margins recover from the pandemic.
6. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The system has a track record of exceptional operations, consistent improvement in unrestricted liquidity levels and significant financial flexibility, Fitch said. The credit rating agency said SCL Health is well positioned to manage the pressures of COVID-19, having built up cash reserves.
7. San Diego-based Scripps Health has an “AA” rating and stable outlook with Fitch and an “Aa3” rating and stable outlook with Moody’s. The health system has a strong balance sheet, strong operations and has maintained a low leverage position, Fitch said. The credit rating agency expects Scripps will continue generating operating levels that are consistent with historical trends following recovery from the pandemic.
8. San Diego-based Sharp HealthCare has an “Aa3” rating and stable outlook with Moody’s and an “AA” rating and stable outlook with S&P. The health system has a healthy financial profile, an excellent balance sheet, a solid business position and is the leading provider in a competitive service area, S&P said. The credit rating agency said the system’s financial performance has remained stable despite COVID-19 and the recession.
As the number of coronavirus cases started spiking again this month, the White House keyed in on a different number — one that paints a more rosy picture of the pandemic: the case fatality rate.
When asked about rising cases at a recent briefing, press secretary Kayleigh McEnany quickly parried. “We’re seeing the fatality rate in this country come down,” said McEnany. “That is a very good thing.”
The case fatality rate is the result of a simple mathematical calculation: the number of deaths divided by the number of diagnosed coronavirus cases. But it’s also a moving target. Case numbers are rising fast; deaths are a lagging indicator, running several weeks behind.
“Measuring … mortality rates on any given day is not a reliable way of communicating about this pandemic,” said Dr. Tom Inglesby, director of the Johns Hopkins Center for Health Security.
It is possible that innovations in treatment methods and therapeutic drugs have helped improve the survivability of COVID-19. It is also possible that with more young people being infected in this latest round, they are less likely to die. But medical experts warn it is also just too soon to be sure. And, they say, it’s an unreliable and misleading metric.
But that hasn’t stopped President Trump from boasting about the figure.
“Our case fatality rate has continued to decline and is lower than the European Union and almost everywhere else in the world,” Trump said Tuesday at his first White House coronavirus briefing in nearly three months.
In his interview on Fox News Sunday with Chris Wallace, Trump asked his staff to bring him the “death chart.” He said “the death chart is much more important” as Wallace ticked through 75,000 daily cases and 1,000 daily deaths.
Trump had that chart displayed behind him during the briefing. But this isn’t a metric public health experts have been using.
Inglesby says that by a more direct measure (the sheer number of deaths), and even adjusted for population size, the U.S. is not doing well compared to other countries around the world.
“What national leaders have the obligation to tell people is just the direct truth,” Inglesby said. “If we give them a false sense that things are getting better when they’re not, then they’re going to make decisions that increase the risk of transmission. And they’re also going to stop having confidence in the information they’re being given.”
Focusing on the fatality rate also glosses over other serious problems with the coronavirus, says Dr. David Relman, who specializes in immunology and infectious diseases at Stanford. He says about 20% of people get really sick with potential long-term health consequences. Plus, he says, the coronavirus is stressing the medical system. And as long as it is uncontained, the virus is holding the economy back. So, as he sees it, talking about the case fatality rate is counterproductive.
“What you do instead when you pull out one little piece and dangle it in front of people is to confuse and distract and undermine the overall message,” said Relman.
He says people need to take this virus seriously and take precautions, and that is a sacrifice that requires leaders to get the public on board. For Trump, accentuating the positive might have short-term political benefits, but there are longer-term risks.
“I think it was a mistake early on to be dismissive of the seriousness of it and that it was just going to go away,” said Mike DuHaime, a Republican strategist.
DuHaime gives Trump credit for coming out this week and treating the coronavirus more seriously than he has in the past, telling people to wear masks and avoid crowds. But he readily acknowledges that Trump has gone through other brief spurts urging the public to sacrifice to slow the spread of the virus, only to reverse himself, downplay the severity and pressure states to reopen.
“In order for him to succeed here politically, his credibility has to be as strong as possible,” said DuHaime, who now works at the firm Mercury.
Trump’s credibility has taken a major hit through this crisis. According to the latest Pew Poll, only 30% of Americans trust Trump to get the facts right on the virus. And Trump’s approval rating has tanked too, something he is attempting to repair with the resumed daily briefings.
“At the end of the day, he just needs to do a good job. I know that sounds simplistic, but when you’re an incumbent running for reelection, doing a good job is really the most important thing,” said DuHaime. “And to this point people haven’t seen him do a good job on what they think is the greatest challenge of his presidency.”
DuHaime points out that people are checking the numbers every day — the number of new cases in their city and state, the number of hospitalizations and deaths. Those numbers are all readily available and easier to find than the case fatality rate.
Median financial ratios for nonprofit hospitals and health systems improved before the COVID-19 pandemic, which will provide some financial cushion to withstand financial pressures, according to a report from Fitch Ratings.
The medians for 2019, based on 2018 data, showed the nonprofit hospital and health system sector stabilized after a period of operational softness. The medians for 2020, based on 2019 audited data, are expected to show improvement in operating margins driven by higher revenues, cost reductions and increased cash flow, Fitch said.
“We expect the 2020 medians will represent peak performance levels until the sector is able to recover from the effects of the pandemic on operations,” Fitch said.
The credit rating agency said the nonprofit healthcare sector is unlikely to stabilize until a COVID-19 vaccine is widely available.
“The sector has shown considerable resiliency over the years, weathering significant events such as the Great Recession and legislative changes to funding,” Fitch said. “However, the coronavirus presents entirely new and fundamental challenges for the sector in the short term in the form of volume and revenue disruption, and over the medium to longer term with expected deterioration of individual provider payor mixes and possible changes in the behavior of healthcare consumers.”
