It can take anywhere from a few weeks to a few months to recover from the health effects of COVID-19.
The journey back to financial health for Michigan’s hospitals is much longer.
As Michigan hospitals fought to save the health of thousands of people during the peak of the COVID-19 pandemic, they couldn’t avoid the side effects on their own financial well-being.
The unprofitability of treating COVID-19 patients, the rising need and costs for protective equipment and the ban on nonessential medical procedures damaged hospital budgets throughout Michigan – with the cost easily in the billions of dollars, said Michigan Health and Hospital Association Senior Vice President Ruthanne Sudderth.
“No matter whether you’ve had thousands of cases of COVID come through your doors or just a few, the financial hit has been significant,” Sudderth said.
As the first wave of COVID-19 diminishes in Michigan, hospitals are counting up their losses. Federal aid is helping, but still leaves many hospitals in the red for 2020.
The federal government allocated $175 billion in April to health care providers through the Coronavirus Aid, Relief and Economic Security Act and Paycheck Protection Program and Health Care Enhancement Act.
Michigan providers have received $2.1 billion in funding so far – which is 1.2% of the total. Only $72 billion of the $175 billion has been distributed to U.S. hospitals so far, spurring political ire.
“It’s a mystery to me,” said U.S. Sen. Gary Peters, D-Bloomfield Township. “The Trump Administration is simply not sending it out. There’s no apparent reason.”
Peters is a ranking member of the U.S. Senate Committee on Homeland Security and Governmental Affairs, which released a report on the hospital bailout funding in late June.
The pandemic is “pushing hospitals toward insolvency,” the report said, and takes issue with the speed and distribution methods of getting the aid to hospitals.
Contrary to the criticisms, a U.S. Department of Health and Human Services spokesman said the federal government is working to distribute the money as quickly as possible and is targeting the dollars for hospitals hit hardest by the pandemic.
Each wave of aid from the $175 billion package has been given out by a different formula.
The first $30 billion was sent out April 10, with the amount per hospital based on past Medicare billings. Peters criticizes the method, saying COVID-19 hot spots and rural hospitals should get a larger chunk of the funding.
Later funding prioritized hospitals with the most coronavirus patients, rural hospitals, skilled nursing facilities and facilities treating uninsured COVID-19 patients.
Balancing budgets was a challenge for Michigan hospitals, as they didn’t know how much aid to expect until the money arrived. Most still are unsure of how much more – if any – they’ll receive.
To date, Beaumont Hospital in Southfield has received the most funding of any Michigan facility, with $182.4 million. Some small providers received as little as $5.
Nearly 7,500 Michigan health care providers received aid, including most if not all of the state’s 134 traditional community hospitals, Sudderth said.
While Peters is advocating the remaining $72 billion be distributed within the month, he’s also pushing for an additional $100 billion in federal funding for health providers – a resolution the U.S. House of Representatives has passed but the Senate hasn’t taken up.
“The financial crisis is still impacting hospitals,” Peters said. “They haven’t recovered.”
How far under are hospitals?
Across Michigan, the MHA estimated in early May that hospitals were losing a combined $300 million per week.
One of Michigan’s largest providers – Henry Ford Health System – would have had to draw on credit lines if it weren’t for federal aid and accelerated Medicare payments, said Robin Damschroder, executive vice president and chief financial officer for HFHS.
HFHS is projected to have lost $500 million in revenue in the first six months 2020, Damschroder said. The health system is getting a combined $340 million in federal aid for all of its hospitals, including $260 million received so far, per HFHS.
Beaumont officials said in April it was losing $100 million per month.
A Detroit Medical Center spokesperson wouldn’t share how much the system has lost during the pandemic, but said the federal aid doesn’t cover all of it.
Munson Healthcare, based in Traverse City, lost $150 million from April through June, said Dianne Michalek, vice president of marketing and corporate communications. Of that, $140 million was from missing out on its normal volume of patients and $10 million was from extra expenses for protective equipment – issues not unique to Munson.
“Everything was more expensive,” Damschroder said. “There were premiums for everything. And if you wanted to be at the front of the line, the premium was higher.”
During the peak of the pandemic in Michigan, HFHS had “every bed full” and then some, Damschroder said. Studies show hospitals are losing about $2,800 per COVID patient since it costs an estimated $20,000 to care for such a patient and $88,000 for patients requiring a ventilator.
The fall of the stock market added to the financial nightmare for some hospitals. While many peoples’ retirement accounts were rocked during March’s stock market crash, the HFHS investment portfolios took a similar hit, Damschroder said.
Hospitals can do nonessential procedures again in Michigan, but the pandemic revenue dip still lingers. Emergency department volumes are still down 30%, Michalek said, and people are still fearful of coming to hospitals.
“We’re trying to call them back because we can fit them in now,” Michalek said. “They’re just saying, ‘No thank you, I’m going to wait.’”
Munson doesn’t expect to return to pre-COVID levels for another year, Michalek said. Not only are patients leery of the hospital for COVID reasons, but many also lost their insurance when they became unemployed and others don’t have money to pay for procedures if money is tighter than before.
“If you’re out of work, you’re debating whether or not you get an elective procedure done or you feed your family with groceries,” Michalek said.
HFHS is still 10% away from their baseline revenue, Damschroder said, and projects to be back at 100% by Aug. 1.
“As long as there’s no resurgence,” Damschroder said. “That would slow it down.”
Only 316 Michiganders are hospitalized with COVID-19, as of June 29, giving hospitals a chance to catch their breath and prepare for what’s next.
In the long term, that means finding ways to tweak their models – like turning to more telemedicine and reducing overhead expenses, Michalek said.
In the short term, it means continuing some of the layoffs and furloughs, holding off on capital improvements and having executives take pay cuts – plus advocating for more federal aid.
Furloughed staff are starting to be brought back, hospital officials said, as about 70% of the 2,800 furloughed at HFHS are back working again, Damschroder said.
Rural hospitals, like Munson, have their own obstacles. Even though the pandemic didn’t hit as hard in rural Michigan, rural hospitals were already struggling to make a profit. A national analysis of rural hospitals found 18 in Michigan were at a high financial risk of closing – which accounts for more than 25% of Michigan’s rural hospitals.
“Some of our larger systems have a financial cushion, but you don’t find that with many of the rural hospitals in Michigan,” Peters said.
Closing a rural hospital has far-reaching implications, Sudderth said. Families will have to drive hours to the next-closest hospital, she said.
“Families do not want to move to a town without good health care and a hospital nearby,” Sudderth said. “So both as health care providers and economic drivers, hospitals in those communities are absolutely critical to the long-term health of the people that live there.”
Hospitals are pivoting to reposition their financial future all while preparing for a potential second wave of COVID-19 to hit Michigan.
“Wave two will be here at some point, in whatever shape or form it’s going to come,” Damschroder said. “I think you’ll want us to be ready and you’ll want us to be stable.”
Health officials say you should be staying at least 6 feet away from others and working from home, if possible.
This article is adapted from MLive.