North Carolina’s health care systems are losing at least $1 billion a month as a result of their response to the coronavirus pandemic and will need substantial financial support, with the worst problems at rural hospitals, the trade association that represents 95% of the state’s health care facilities says.
In a detailed statement provided to Carolina Public Press, the N.C. Healthcare Association estimates that its members have already lost about $1 billion a month and that their collective revenue shortfall will grow worse as coronavirus-related expenses mount. To partially recoup these losses, the hospitals are seeking a nearly $500 million bailout through the state’s share of a federal relief program, as well as millions in grants to target rural hospitals.
“Because North Carolina hospitals have eliminated nonessential services and procedures and have spent a lot of money getting ready for and responding to COVID-19, they are out approximately $1 billion a month based on information NCHA gathered from our members in March.
“Virtually all hospitals told us they expected to have negative cash flow in March, and that is likely also true for April. The current situation cannot be sustained,” said the statement provided by Cynthia Charles, the association’s vice president for communications.
“NCHA estimates that N.C. hospitals would likely need a $3 billion bailout” if the current combination of postponements and costs continues until May 31, the statement added. For now, however, the association is asking for a smaller but still substantial amount to offset its members’ losses.
To help remedy the shortfall, the 130-member association is requesting a slice of funds coming to the state as part of the federal Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act.
Based on a payment of $25,000 per inpatient bed, the association is asking for a total of $472 million that would go to its members.
The group is also asking the General Assembly to establish a grants program specifically for rural hospitals. Those grants would reimburse rural hospitals for lost revenue stemming from forgone elective procedures, staffing and other COVID-19-related expenses.
A total of $75 million will be requested if and when the program is enacted.
Earlier this month, NCHA members received direct deposits totaling about $450 million from the Centers for Medicare & Medicaid Services, according to Cody Hand, the association’s deputy general counsel.
Losses, by the numbers
In its breakdown of pandemic-related costs at member hospitals, NCHA cites about $800 million per month in forgone revenues from elective procedures, $135 million in excess supply and labor costs, and $82 million representing an increase in expenses to protect health care workers and patients and other miscellaneous costs, for a total of $1.017 billion monthly.
The association defines “excess supply and labor costs” as including personal protective equipment and the cost of retaining traveling nurses and doctors.
“Other expenses” include setting up and operating pop-up COVID-19 screening sites and testing centers and conducting lab tests and telemedicine operations.
The challenge for rural hospitals
Hospitals in rural areas are being especially hard hit, the association warned.
“Rural hospitals have less financial wiggle room than their larger, more urban counterparts,” NCHA’s statement said. “All of the rural hospitals survive on those daily procedures that are no longer happening.”
North Carolina has 49 rural hospitals and the second-highest rural population in the nation, according to NCHA.
Within its tally of monthly losses, the association said rural facilities alone experienced $118 million in forgone revenues for elective procedures, $13 million in excess supply and labor costs, and $14 million in expenses to protect health care workers and patients, for total losses of $145 million per month.
The suspension of elective surgery and other nonurgent procedures amounted to a costly trade-off of revenues in exchange for additional capacity and equipment that were needed as COVID-19 cases surged.
In March, both the Centers for Medicare & Medicaid Services and the N.C. Department of Health and Human Services recommended that medical facilities put aside nonurgent procedures in order to address COVID-19, the disease caused by the new coronavirus.
But now, just short of a month later, “NCHA and our members are starting to participate in conversations about how and when to resume elective procedures,” the trade group told Carolina Public Press.
In testimony delivered by livestream to a working group of the House Health COVID-19 Committee on April 14, Roxie Wells, president of Cape Fear Valley-Hoke Hospital in Raeford, underscored the financial challenges facing rural providers.
“The uncertainty of what we would encounter during the surge of the pandemic has led to a level of preparation that is unprecedented in cost, and that has left most hospitals in general, but particularly rural and independent hospitals that were already financially fragile in dire straits,” Wells said.
In addition to the cancellation of elective surgery and diagnostic procedures, Wells cited decreased volume in emergency departments and associated clinics, the purchase of personal protective equipment “at excessive cost,” installation of telehealth capabilities and other expenses as factors contributing to the financial losses at rural hospitals.
“Many of our rural hospitals that eliminated our elective procedures are not part of larger systems that have the resources to backfill the lost revenue,” Wells said. “Those same hospitals operate with less than half a year cash on hand, and the lack of daily revenue has forced them to make tough choices.
“I know that rural hospitals were already in peril before this crisis and those that were breaking even or had small positive margins are now in the red with no sign of recovery.”
For rural hospitals that are relatively close to urban communities, Wells suggested these facilities could improve their odds of survival by providing non-COVID-19 medical care and low-level COVID-19 treatment during the pandemic and transporting patients to their facilities from those nearby cities. Her own facility is just west of Fayetteville.
“That coordination can happen and needs to begin immediately,” Wells said.
Last week, the American Hospital Association and several other organizations released a statement providing guidance on how elective surgery and other nonurgent procedures might be reintroduced.
Among other things, the guidance called for a “sustained reduction in the rate of new COVID-19 cases” in a given geographic area for at least 14 days before elective surgery is resumed.