Battered by losses, hospitals seek $450 million from the state
Elective surgeries resume, but many facilities still are running in the red
With the state recording fewer new coronavirus cases and people returning to restaurants and stores, residents in need of routine or urgent medical care have also ventured back into hospitals.
After months of sluggish emergency room traffic and no elective surgeries, Connecticut’s hospitals have seen a rise in demand for those services. Outpatient procedures and primary care appointments have resumed, even if some patients are still keeping their distance.
But hospitals, pummeled financially by months of added expenses and a steep drop in revenue, haven’t recovered. Many are still projecting sizable losses for the end of their fiscal year in September.
Federal stimulus money and belt tightening measures have not balanced the books, and hospital leaders are now looking to the state for support. They have asked Gov. Ned Lamont’s administration to contribute $450 million.
“We are in discussions with the administration, and we’re hopeful that our ongoing talks regarding the need for state relief will be resolved in the near future,” said Mark Schaefer, vice president of system innovation and financing for the Connecticut Hospital Association. “We’re looking for the maximum assistance the state can provide to the hospitals to get them back to a place where they can be relied upon to respond swiftly and successfully like they did in March.”
Max Reiss, a spokesman for Lamont, did not comment directly on the request by CHA but confirmed state officials are in talks with hospital leaders.
“The state must ensure it has adequate resources to pay for personal protective equipment, to provide resources for our local school systems, and to pay for adequate testing capacity,” he said. “Our hospitals have been an incredible partner throughout this public health emergency and we will continue to work with them to address their needs.”
Next month, the administration expects to finish divvying up Connecticut’s $1.38 billion share of the Coronavirus Relief Fund – Congress’ chief vehicle to provide direct pandemic relief to states and large cities. But with more than $760 million already committed – and outstanding needs far greater than the $620 million yet to be assigned – state officials could be facing hard choices unless more relief comes soon from Washington.
State leaders have not provided an estimate for how much of the relief funds will be directed to hospitals, but Melissa McCaw, Lamont’s budget director, said the facilities will be a major beneficiary of the remaining $620 million.
One way to ensure that state money gets to all of the hospitals in need would be to create a stabilization fund, “from which dollars could be dispersed or allocated to individual hospitals proportionate to their need,” Schaefer said.
The needs vary. Some health systems have recorded losses of $6 million a month while other, larger hospitals have lost as much as $40 million a month.
Statewide, hospitals are expected to be short as much as $1.4 billion this fiscal year, despite receiving $625 million in federal relief so far.
To stay afloat, some have sought and received up to six months of advanced Medicare payments that must be returned starting in August. That makes the request for state assistance urgent, Schaefer said.
He estimated that hospitals collectively owed more than $1 billion for their advanced Medicare payments. If they don’t pay it back within a certain time period, interest will accrue.
“We’re hoping we can conclude these discussions in relatively short order,” Schaefer said. “If that money doesn’t get paid back timely, there are interest penalties. So that’s something of great concern to the hospitals.”
Patients return, but fiscal troubles persist
As the COVID-19 crisis escalated this spring, hospitals canceled elective surgeries, and trips to physicians’ offices and emergency departments plunged as people fearful of exposure stayed away.
That meant millions or tens of millions of dollars in lost revenue each month, along with added expenses for protective gear, staffing and infrastructure improvements to keep staff and patients safe.
In May and June, as the state lifted certain restrictions and businesses began to reopen, residents who had delayed medical care returned to hospitals and doctors’ offices.
The return rates differ from hospital to hospital, but most reported a significant increase in patients coming back for services.
In the Yale New Haven Health system, which includes five hospitals, emergency room visits dropped to about 40% of their normal volume and elective surgeries ceased at the height of the pandemic. Today, ER volume is 60% to 80% of what it was pre-pandemic, depending on the facility, said Christopher O’Connor, executive vice president and chief operating officer. Surgeries – elective and emergent – are about 80% of where they were before coronavirus spread in the state, and inpatient services are at 90%, he said.
“It’s climbing back, but it’s still not where it was before,” O’Connor said. “It’s continuing to build on a week-over-week basis.”
In March and April, the Yale New Haven system lost $140 million each month. The losses have slowed recently – to $60 million in June, O’Connor said. And the system has received about $200 million in federal stimulus money.
But officials still expect to come up short in September.
“We were averaging about a 3 ½% margin when we closed the month of February and were on pace to have a 4% margin for the year,” O’Connor said. “Now, we’re likely not going to have a margin, and we will likely lose money. That’s going have a significant toll.”
He did not reveal an end-of-year estimate for the losses.
At Bristol Hospital, officials expect to be short about $16 million when the fiscal year ends, even after receiving $4.2 million in federal aid.
During the spring, emergency room visits were down by 40% and elective surgeries were canceled. The hospital has rebounded somewhat since then – emergency department visits are down only 15% and elective procedures are at 85% of the typical volume.
But the hospital is still struggling. Administrators furloughed more than 100 employees and reduced hours for about 200 more. Some of those furloughs have turned into layoffs, though officials did not say how many people were out of a job.
President and CEO Kurt Barwis is hoping for more help from the federal government and the state.
“The hospitals that got everything ready – spent all their time and money to prepare – but didn’t see the influx of patients and, accordingly, didn’t get ‘hotspot’ money from the federal government, basically got crushed in this,” he said. “So hopefully there’s going to be another round of federal support because come Sept. 30, I’m looking at my debt covenants and I know I’m not going to make one of those.”
As of April, hospitals statewide had spent about $200 million above their planned expenses to cover the cost of protective gear, infrastructure improvements, additional staffing and other resources related to the pandemic. More recent figures on those expenses were not available.
While some hospitals saw a surge in patients, others didn’t see as large of an increase and didn’t qualify for federal funds available to facilities with higher admission rates.
At Hartford Healthcare’s seven Connecticut hospitals, patients have steadily begun returning for services.
The hospitals that got everything ready – spent all their time and money to prepare – but didn’t see the influx of patients and, accordingly, didn’t get ‘hotspot’ money from the federal government, basically got crushed in this.”
Trips to the emergency department, which plummeted in the spring, are back to about 85% of their normal volume, said Jeffrey Flaks, president and CEO. Surgeries are at 98% of the normal volume – up from 30% at the height of the pandemic.
But the system could lose as much as $200 million by the end of the fiscal year without additional federal or state aid, Flaks said. It has received more than $120 million in federal stimulus money so far.
“Our performance this year could be anywhere from breakeven to an approximately $200 million loss depending on what occurs with the [state and federal] distributions, and to the extent that we don’t see a second wave,” Flaks said.
Trinity Health of New England, which operates Saint Francis Hospital and Medical Center and three other Connecticut facilities, was losing $30 million to $40 million a month in the spring. Its finances have improved recently as patients returned; the system recorded a loss of just under $30 million in May and expects to have lost about $15 million in June (calculations are not yet complete).
But even after receiving more than $60 million in federal funds, the system is running the red, said Jennifer Schneider, senior vice president and chief financial officer. By September, Trinity Health expects its Connecticut facilities to be short about $45 million.
It has announced layoffs, furloughs and reduced hours for employees.
“I hate to say it, but that’s likely the best-case scenario because it does include all of the things that we tried to implement quickly to really mitigate these costs,” Schneider said of the $45 million loss estimate. “The last thing we want is for the burden of these losses to be on our patients or on the community.”
Hospital leaders have taken out advertisements and launched social media campaigns to encourage patients to come back.
Those campaigns focus on safety measures and the importance of not delaying care.
“Some people are still practicing quote-unquote medical distancing, so we’re very focused on pushing out the message that hospitals … are following the highest standards of reopening to ensure the settings are safe,” Schaefer said. “Every protocol is being followed around mitigating the prospect of transmission.”
At Hartford Healthcare’s facilities, emergency room visitors are triaged outside. COVID-19-postive patients or those suspected of having the disease are separated from people with other conditions.
“We’ve made many modifications to our facilities, from where and how we board and room people to how we segment patients based on different needs,” Flaks said. The hospitals have also amassed a “considerable stockpile” of protective gear for workers, he said.
Employees at Bristol Hospital take the temperature of all patients and their visitors upon arrival, and the facility also screens its workers before each shift. Registration for outpatient procedures and radiology is now done in one large room, and chairs in the waiting area are spaced six feet apart.
“We’ve created a controlled environment where we’re not leaving it up to people to decide how far they’re going to sit apart,” Barwis said. “We’re trying to control the flow of people and keep them away from the different departments until the exact time they’re needed.”
Anyone coming in for an elective surgery is tested for COVID-19. Tests must be negative before the surgery can go forward.
Emergency room patients who are likely to be admitted also receive a coronavirus test.
“From a patient safety standpoint and from an employee safety standpoint, we absolutely have to do that,” Barwis said.
The Yale New Haven Health system has arranged television commercials and social media ads reassuring the public that its hospitals are safe. While the patient volume hasn’t reached pre-pandemic levels, O’Connor is optimistic more people will return.
“We’re in a very good place relative to equipment and supplies for our staff, and we’re adhering to the proven mitigation steps around social distancing, hand washing and face covering,” he said. “If we continue to do all that, I believe people will continue to come back.”
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