Health System Leaders Describe COVID’s ‘Financial Roller Coaster’
In this recurring section, Healthcare Innovation editors take an in-depth look into the numerous ways the COVID-19 pandemic is impacting the healthcare ecosystem. In this issue, we interview C-suite health system leaders who illustrate the tumultuous financial landscape over the past year.
The last year has been a trying one for healthcare stakeholders of all shapes and sizes, on a variety of levels. From an economic standpoint alone, while some health systems are finally starting to feel a small sense of relief, the path to financial recovery is still a long and daunting one.
For example, one analysis, made public in late February from Kaufman, Hall & Associates, and released by the American Hospital Association (AHA), showed that the COVID-19 pandemic will continue to impact the financial health of hospitals and health systems through 2021. The analysis specifically found that total hospital revenue in 2021 could be down between $53 billion and $122 billion from pre-pandemic levels. “This sustained financial squeeze on the hospital field could result in the slowdown of vaccine distribution and administration, continued pressure on tired front-line caregivers and diminished access to care, including in rural areas,” according to the report.
Just like for many patient care organizations, leaders at Edward-Elmhurst Health, a three-hospital system serving the west and southwest suburbs of Chicago, have had to deal with the constantly changing nature of the pandemic and the many different ways the community has been impacted. In a recent interview, Denise Chamberlain, system executive vice president and chief financial officer (CFO) at Edward-Elmhurst, describes the “financial roller coaster” the organization has been riding over the last year.
“It’s been a crazy year and yes, the best way I can describe it is a roller coaster. In terms of census alone, which drives our finances, we went from emptying out the hospital and suspending elective procedures, to making room for COVID patients who didn’t initially come, to then filling up the hospital with COVID patients, to [eventually] resuming elective procedures. But at the same time, some patients were afraid to come in, then we had multiple COVID surges, and now COVID has started to subside with vaccinations. And we also didn’t have flu [admissions], which usually fills the hospital,” Chamberlain illustrates.
She adds that at the onset of the pandemic, the initial goal was just trying to make sure the health system could survive financially and that it had enough financial liquidity to get through the roughest patches of having near empty hospitals. From there, operational leaders at Edward-Elmhurst were able to slow down and take a longer-term view, allowing them to make more thoughtful decisions. “This was in spite of the fact that with June 30 being the start of our fiscal year, just the first two months [of the crisis] hit us for about $100 million [in losses], not counting subsidies we received to cover some of that. But things have started to get better, and we think we’re turning the corner,” says Chamberlain.
Going forward, a primary mission of the health system will be to continue to communicate and educate the community on the importance of coming back and why it’s now safe. “We wanted to use all the different vehicles we have available to get the word out it’s safe, that we have instituted measures to guarantee your safety here, and also to emphasize the importance of maintaining your regular healthcare schedule for tests, check-ups and procedures,” notes Keith Hartenberger, system director, public relations, at Edward-Elmhurst. “Between blogs on our website, social media, media releases, and making providers available for media interviews, we have used anything and everything to let folks know it’s safe to come to the hospital and that it’s important,” he says.
Chamberlain adds that the context and framing of this messaging has been equally as important as getting it out. For example, it was necessary to convey to patients that Edward-Elmhurst was not marketing to come back so they could generate revenue, but rather because “we care about you and here is the risk we want you to be aware of,” she says. “And we were also transparent; one of our hospital CEOs has been doing a podcast, and through that we have been very [open] with the community about our patient volumes, the ebb and flow of COVID, employee testing, and all the things we have done at our hospital. We weren’t just telling them the good stuff and asking them to buy services from us; we saw it as a community partnership.” She notes that the health system also held virtual community town halls, with different variations, in which the system CEO and other leaders were there to answer questions and provide updates with numbers.
Ultimately, Chamberlain reports that Edward-Elmhurst is “fortunate to be very strong financially,” and that the organization is forecasting to break even this year, even with federal subsidy help. However, she adds, “We don’t anticipate that there will be further subsidy dollars, so [a lot] will depend on how quickly patients come back. We have a stressed out and exhausted workforce that we need to continue taking care of with strong pay and benefits. The financial struggles have continued and getting back to profitably is a commitment for us next year,” Chamberlain acknowledges. “Figuring out how to do that will be a big hurdle for us.”
In Rural Colorado, One Hospital CEO On Avoiding Closure During the Pandemic
The crisis has had a devastating impact on just about every aspect of the healthcare landscape, but disparities do exist in entities’ abilities to respond. For example, smaller and rural healthcare organizations have fewer resources than larger, integrated delivery systems.
Another challenge more specific to rural hospitals is around the complexities with medical transport to and from rural areas. Ground travel could take several hours to get to a hospital with open beds, and while air travel is an option, protecting healthcare workers and flight staff when transporting very sick people with respiratory diseases in close quarters is not easy.
Taking a step back, it’s important to note that many rural hospitals have been on the brink of closing their doors, if they hadn’t shut down already, even before the pandemic began. Since 2005, 180 of these facilities have closed, according to the North Carolina Rural Health Research Program. Another model developed by the Chartis Center for Rural Health noted last February that more than 450 rural hospitals are vulnerable to closure.
Compounding the issue even more is that “the 20 percent of the U.S. population that lives in rural areas consists of generally older individuals with more chronic conditions who are more likely to be under- or uninsured. They are more likely to be experiencing poverty and have limited access to healthcare,” Joanna Hart, M.D., an assistant professor of medicine at the Perelman School of Medicine, and head of the University of Pennsylvania’s Leonard Davis Institute (LDI) of Health Economics Rural Health and Policy Research Working Group, said during a virtual seminar last June put on by the LDI.
“Rural hospitals tend to have lower days of cash on hand, and higher rates of negative operating margins,” added a panelist of that session, Lisa Davis, director of the Pennsylvania Office of Rural Health and Outreach. “So they’ve been struggling traditionally. Then, a pandemic like COVID-19 comes along and they need to essentially pivot on a dime and close down service lines that tend to bring in revenues such as surgery, outpatient services, emergency departments. They don’t have the economies of scale to be able to rely on other sources of revenue.”
To discuss in more detail the unique challenges rural hospitals have been dealing with as a result of the pandemic, Healthcare Innovation Managing Editor Rajiv Leventhal recently spoke with Andy Daniels, CEO of Memorial Regional Hospital in Northwest Colorado, which includes a 25-bed hospital, multi-specialty medical clinic and a rehabilitation center. Daniels also discussed strategies his organization implemented to respond to the crisis and how the future landscape looks. Below are excerpts of that interview.
Can you give an overview of what the rural population landscape looks like where you’re located in Northwest Colorado?
We are very rural. Our county is 90 miles wide, and there are [about] 10,000 people who live in the county. It’s very large, geography-wise. There’s always a challenge here for resources, and not just from a pure fiscal standpoint. Rural [healthcare] has suffered a lot, especially when there were decisions—not necessarily here in Colorado, but in other states—to totally shut down elective surgeries, and not allow business to be done, whether it was safe or not. A lot of the decisions at state levels were broad and sweeping, and were not necessarily looked at through the lens of what was safe by region or area. That ended up hurting a lot of hospitals, and the volumes haven’t recovered yet.
What has Memorial Regional done to try and speed up that recovery?
At least half of [hospitals] in Colorado run negative margins year after year. We’ve all suffered financially, and for us, I think we got lucky because the year prior we engaged with an outside company called Firstsource to be able to do our revenue cycle management. Prior to them taking over, I think we would have sunk. I really do. Between the lower revenues coming in with COVID and not having the technology and processes that they put in place to be able to really maximize our revenue cycle, we probably would have been one of those hospitals that either closed or filed bankruptcy. But now they [run] our whole revenue cycle, and they do it much better than we could ever.
What else can you illustrate about the unique situation rural healthcare was put in last spring at the pandemic’s onset, and how that has evolved over the last year?
For much of rural healthcare, it became a resource problem. We had a very difficult time getting proper PPE, and the system was overwhelmed. At times, we were unable to transfer a patient to other locations. At least in Colorado, there were several times when bed capacity became very overwhelmed or near overwhelmed that the larger facilities told us, ‘Do the best you can. We will try to help you out but you’re really on your own.’
So we really had to innovate in a lot of different ways. We had community members making masks for us, which was helpful at the beginning. We were working with groups, self-making hand sanitizer, doing those kinds of things. In some ways, we were a little lucky here that things didn’t spread quite as fast at the beginning as they did in larger cities, but eventually it did catch up to rural. So we went through a few pretty bad surges, just as the rest of the country did.
Also, we didn’t really have a telehealth presence or capability. Fortunately, Medicare and our state Medicaid allowed some waivers for that, and we had to get pretty creative pretty fast when things really shut down to be able to deliver some care. We started out using Zoom and other similar technologies to try to do patient visits, and now we’ve actually formalized that through our EHR, so we can now do those visits in a more structured way. We’re not sure how much longer the waivers to do these things will exist for Medicare and Medicaid patients. Prior to the pandemic, both of those payers were not really accepting of paying for telehealth.
How does the future of rural healthcare look like to you, specifically as hospitals have to now do outreach to patients letting them know it’s safe to come back in?
We have done marketing and social media pushes, trying to let people know that these are the steps we’re doing to [ensure] safety. I don’t know that we’re terribly different than other businesses that are trying to do the same thing. I can’t fix the economy side; the economy is going to have to come back before people are going to come back, to a certain degree. I think 2021 is still going to be a disaster, and I’m hopeful that 2022 may not be a disaster as more people get vaccinated this year.
So hopefully by 2022 we’ll be back to some semblance of normal, but I don’t think 2021 is looking great. I see our current volumes compared to the year before, and as compared to this time last year, our volumes are [significantly] down. Our patient days were 22 percent higher than this time last year, our ED visits were 15 percent higher, and our clinic visits were 29 percent higher. So it’s still tough out here in the land of rural, and there isn’t going to be anybody coming to save us.
