Garren Colvin, CEO of St. Elizabeth Healthcare, wore a mask when he visited the Northern Kentucky hospital where Covid-19 patients are treated by members of St. E’s Infectious Disease Response Team.
“All of our Covid patients are at our Fort Thomas campus,” Colvin said. “I walked on every floor that has a positive patient. I did it a few weeks ago to see the morale of those associates – just to see their grit and what they’re doing to make these patients better.
“I did it because I wanted to tell them that there’s light at the end of the tunnel,” Colvin said. “Hang in there. We’re going to get through this.”
Worker morale isn’t the only thing that Edgewood-based St. E’s and other hospital systems fret about during the pandemic. Medical centers have posted operating losses of millions of dollars each week because of government-imposed bans on lucrative elective procedures on both sides of the Ohio River.
Such procedures – which were halted to ensure a supply of face masks, beds and other equipment in case of a surge of coronavirus disease – can account for half of all hospital revenue.
So even as doctors and nurses struggle to care for patients amid the coronavirus crisis, some U.S. hospitals are facing the fight of their lives.
St. Elizabeth, a $1.3 billion system with 9,007 employees, is projecting a $70 million decline in revenue through April because of the restriction. “Over a week’s period, you’re probably looking at a $10 to $12 million operating loss,” said Colvin, who nevertheless is confident St. Elizabeth will rebound.
The Kentucky ban lifted May 13, when hospitals were permitted to resume non-emergency procedures at 50% of pre-pandemic patient volume. St. Elizabeth and other Kentucky systems can return to full capacity May 27. A similar restriction in Ohio ended May 1 for outpatient procedures.
However, Colvin said, “what you’re going to see is a huge impact to the bottom line for 2020.”
In Ohio, hospitals have faced a combined drop in revenue of about $1.3 billion per month. It’s unclear whether some hospitals might cease to exist – or how soon those that survive will recover. Federal stimulus dollars are unlikely to cover all the losses.
“Hospitals have different strengths and balance sheets to ride it out,” said Dr. Rick Lofgren, CEO of UC Health and chairman-elect of the Ohio Hospital Association, which represents 236 hospitals and 14 health systems. “Before we went into this, 20% of the hospitals had almost no cash on hand. In particular, rural hospitals have been affected by this. In a very real way, there are threats to the survivability of hospitals.”
In addition to being vital to the well-being of communities, hospitals are economic machines, Lofgren noted.
Hospitals pumped $17.5 billion into Cincinnati’s economy in 2012, according to the most recent study prepared for the Health Collaborative, whose members include 30 hospitals and nearly 100 other health care providers. The largest contribution was $3.5 billion paid to 63,000 people who worked for health systems. Both the health care workforce and its economic impact on the region have grown since then.
The indirect impact totals billions of dollars, including spending by local businesses to produce goods and services for hospitals. On top of that, many Cincinnati employers have a stake in how hospitals operate because of health insurance benefits for their own workers.
Lofgren oversees a $1.9 billion system with 12,360 employees, many of whom work at the flagship University of Cincinnati Medical Center. The CEO and others at UC Health have taken pay cuts, and some employees have had hours reduced amid a $25 million operating loss in March.
The loss is expected to be worse for April once the numbers are crunched, but nobody has been furloughed. UC Health’s fiscal year ends in June, and the system could be down in excess of $100 million for the fourth quarter.
“We were having a strong year,” Lofgren said. “We went into this crisis up over 10% in terms of revenue from the previous year.”
No immunity
While Cincinnati Children’s Hospital is the site of a clinical trial of an experimental vaccine designed to prevent coronavirus disease, it could be years before the pandemic is contained. For now, there is no cure and no way to prevent Covid-19.
Children’s is the largest local hospital based on revenue of $2.6 billion, and it’s the region’s largest employer with a workforce of 16,310. Yet, even the Avondale-based system isn’t immune to the economic downturn.
Thousands of surgeries and outpatient visits were postponed and several of the hospital’s locations closed in March or April, which followed Gov. Mike DeWine’s order to halt elective procedures.
Employees left without duties have had their pay reduced by 20% from May 10 through July 4. Others taking cuts include Children’s CEO Michael Fisher, other top execs and their direct reports. Merit raises for other employees will be eliminated in the coming fiscal year.
Cincinnati-based Bon Secours Mercy Health, which operates five local hospitals and 45 others, has furloughed some of its 60,000 workers, frozen the wages of all nonclinical personnel and implemented a hiring freeze because of more than $100 million a month in losses in net revenue. Instead of $10 billion in pro forma net revenue projected in January, CEO John Starcher expects it might end up with $8 to $9 billion for 2020.
Starcher noted that Mercy Health has established a $60 million fund to help workers on furlough or reduced hours, as well as reimbursement for child care or elder care. Other local hospital systems have adopted similar measures.
Mark Clement, CEO of the $2.1 billion TriHealth system whose flagship hospitals are Good Samaritan and Bethesda North, said some of its 12,500 workers have been furloughed.
“As we discontinued clinical operations, we closed down our freestanding surgery centers, we closed down our TriHealth Fitness & Health Pavilion and a number of operations to comply with the governor’s executive order,” Clement said. “We reduced hours for a number of our team members.”
TriHealth has begun calling back furloughed workers to reopen the surgery centers, but Clement and the rest of the executive team have taken 20% reductions in compensation. “We need to share the pain,” he said.
The ban on elective procedures and Ohio’s other mitigation efforts flattened the curve of Covid-19 and kept the patient surge manageable, Clement said.
“But with the stroke of a pen, TriHealth went from a $2.1 billion system to a roughly $1 billion system,” Clement said. “Our cost structure was knocked down 50%.
“We reported the largest operating loss I’ve seen in my career,” Clement said. “It’s a $24 million operating loss just for March. The good news is we had $24 million to lose. We are one of the strongest health systems in the country from a balance-sheet perspective.”
However, TriHealth’s operating loss for April likely will be worse.
“It’s never good to lose money, but this was due to circumstances that obviously were entirely beyond the control of our organization,” Clement said. “I’d be shocked if every health system in the country wasn’t in a proportionate way reporting similar operating losses.”
TriHealth’s fiscal year starts in July. The new budget had contemplated growth in outpatient and physician services as well as a 3% operating margin, which is considered good.
“And then Covid-19 arrived, and that budget is meaningless today,” said Clement, who noted that a placeholder budget to be presented to the TriHealth board hasn’t been finalized.
“Because there is no playbook on this – and we’ve never seen something like this occur in any of our lifetimes – our assumptions are basically educated guesses,” Clement said. “We’ve talked to other health systems around the country and very smart consulting firms, and no one believes the health care industry is returning to the pre-pandemic baselines.
“No one believes we’re going to care for as many patients – at least until there is a vaccine and herd immunity is developed through a vaccine or exposure,” Clement said. “Most experts don’t believe that’s going to occur for the next 12 to 24 months. So, we’re going to be operating with the new abnormal.
“We believe lingering fears will impact consumer demand for a lot of things, not just health care services,” Clement said.
Two out of five U.S. adults have decided against visiting a primary care provider such as a doctor, nurse or dentist during the pandemic, and a similar number of parents decided against such a visit for a child, according to an April 28 survey by Acupoll Precision Research of Cincinnati.
At the same time, one in four parents decided against taking a child to get a vaccination, and one in three adults avoided seeing a medical specialist such as a heart doctor, dermatologist or eye doctor, according to the national survey of 1,000 people.
UC Health’s CEO has noticed a decline in visits for serious medical issues.
“We’ve seen a 20% to 30% reduction in the number of stroke cases,” Lofgren said. “We’ve seen some decrease in variations of heart attacks. … People are at home kind of gutting out their heart attacks.
“People seem to be afraid to receive care or they’ve delayed it,” Lofgren said. “Obviously, we’re experienced in handling and containing infections and minimizing any kind of exposure.
“One of the things all of the leaders of the health care systems think is important is making sure the community understands we’re open for business and ready to start taking care of all the health care needs in a way that’s safe and protects you from exposure to the virus,” Lofgren said.
On the front lines
Christ Hospital has furloughed some of its 6,594 employees for May and June because of declining revenue. The furloughs don’t include workers who deal directly with Covid-19 patients. The 25% pay cuts implemented in April for CEO Arturo Polizzi and other executives will continue.
“The whole month of April was kind of closed for business on the surgery side,” Polizzi said.
“We operate on a very thin margin, a 1% margin, so that goes away really quickly once you stop services,” Polizzi said. “We’re right at the $1 billion mark for revenue, and at a 1% margin typically we make $10 million in a year to reinvest back.”
The patient census was over 300 in early May – for the first time in eight weeks. “As volume starts to come back, those people on furlough will come off in a hurry,” Polizzi said.
But the CEO is following the governor’s lead on ramping up business. “He keeps using the word gradual, so I keep mimicking his language,” Polizzi said. “We acknowledge there’s uncertainty with that, but it’s just reality given the way this virus is spreading.”
However, “I’m feeling optimistic,” Polizzi said. “I’m hoping by summertime we’ll be back to inpatient procedures and bringing people back off the furloughs.”
Meanwhile, the CEO of St. Elizabeth Healthcare has guaranteed all of the system’s employees job security with full benefits through May 30.
“This isn’t a gift,” Colvin said. “We’ve done this in preparation for the reopening of health care and the start of the reopening of the economy. … We felt like we had to protect our workforce.
“This has nothing to do with me trying to one-up my competition,” Colvin said. “The one thing that this pandemic has done is brought a lot of the CEOs a little bit closer – there’s a lot of mad respect for everything that we’re all going through.”
Instead of laying people off or reducing hours if their jobs were disrupted, St. E assigned such employees new responsibilities.
For example, “we have athletic trainers taking temperatures at the front door,” Colvin said.
To prevent spread of Covid-19, “every patient, every employee, every office worker, every vendor – 100% of the people walking through our door – gets a temperature taken,” Colvin said. “If they have a 100.4 or greater, they are turned away. And those who come in get a mask immediately.”
No Covid-19 patients are treated at St. E’s Edgewood and Florence hospitals, where surgeries are performed, he noted.
“We hope that we can get people comfortable with coming back,” Colvin said. “There are people who need our services desperately. Surgeons have a backlog. And we’re ready to operate our surgery center seven days a week – 12 to 16 hours a day – so that we can meet the demand.
“That’s why we didn’t want our staff to be furloughed or sent home in a period of time when we really had to ramp up for an explosion of these procedures and surgeries,” Colvin said. “These are the individuals who are at the front line of this war.”