Hospitals face money crunch Salary cuts, furloughs among responses to dramatic loss of revenue
As hospitals around Maryland grappled with a flood of coronavirus patients, treatment for other patients dropped so much that the executives are now turning to salary cuts, furloughs and other measures to cope with the loss in revenue.
About four dozen acute care hospitals expect to lose about $1 billion in revenue from April through June, or about a quarter of their normal revenue, according to the Maryland Hospital Association.
Hospital services are down about 30% from halting procedures that were not urgent, the association said. Emergency visits also have plummeted, possibly due to fewer car crashes and other accidents as people stay at home but also likely due to people’s fear of becoming infected while seeking care.
At the same time, hospitals have increased spending for protective gear for staff treating COVID-19 patients, as well as to add and staff extra beds and buy other equipment such as ventilators.
On Wednesday, Gov. Larry Hogan lifted the restriction instituted weeks ago on elective procedures, potentially easing the financial hit. Some of the lost income also will be recouped through temporary rate increases on all patients. And federal health officials announced Friday that about 10 hospitals will get just over $100 million in aid.
Officials, however, say this will all likely be insufficient to shore up hospital finances.
“The opportunity to restart non-emergency procedures should help offset some of the revenue losses that were forecast, but the predicted losses for all of April and
half of May are still very real,” said Bob Atlas, CEO of the Maryland Hospital Association.
“Hospitals will gradually ramp up the formerly prohibited procedures as their capacities allow and as patients’ needs present themselves,” he said. “Considering the conditions and limitations associated with the lifting of the ban — which hospitals agree with — few, if any, hospitals will see their business return to full pre-crisis levels any time soon.”
Atlas also said more federal financial relief remains uncertain and the rate increases “only go so far to offer relief.”
Hospitals including Johns Hopkins have told staff, including doctors treating COVID-19 patients, about pay and benefit reductions that could cost them a significant portion of their annual income.
A recent letter to workers at Johns Hopkins Medicine, which includes the system hospitals and school of medicine, officials recognized staff contributions during the pandemic but announced elimination of merit raises, limited hiring, furloughs and suspension of retirement contributions. Executive pay will be cut up to 20%.
“Unfortunately, Johns Hopkins Medicine is not immune to the broader economic impact of the pandemic,” said the letter signed by Dr. Paul Rothman, dean of the medical faculty and CEO of Hopkins Medicine, and Kevin Sowers, president of the Johns Hopkins Health System and executive vice president of Hopkins Medicine.
“This is a challenging time for our communities and our country," the letter said. "America’s health care providers, including the tens of thousands of men and women of Johns Hopkins Medicine, are giving of themselves to care for the sickest among us.”
On Friday, federal officials announced Johns Hopkins Hospital in Baltimore received $16.5 million in aid and its Howard County General Hospital received $7.7 million.
Another hospital taking steps to cut costs is Anne Arundel Medical Center, which has cut executive pay, furloughed about 1,100 workers, retrained 350 to work in other areas of the Annapolis hospital. Luminis Health, which is the parent company for the hospital and some doctors’ offices, has offered loans to replace lost income for primary care physicians and others whose normal practices are shuttered during the pandemic. The hospital received $11.9 million in federal aid.
LifeBridge Health, operator of Sinai, Northwest and Carroll hospitals and other facilities, also has turned to furloughs, as well as delaying capital projects to put the system on more secure footing before fully reopening.
“With the loss of revenue from elective surgeries and other patient volumes, we have taken actions to mitigate the financial impact on our organization and the services we offer,” said Sharon Boston, a LifeBridge spokeswoman, in a statement.
“As is the case for other health systems, we also made the difficult decision to furlough some employees, with a focus on staff working in areas closed by state mandates,” she said. “We have worked to redeploy as many employees as possible.”
Boston did not provide specifics on the number of people furloughed or projects delayed.
Other large hospitals systems, including the University of Maryland Medical System and MedStar Health, did not provide details of how they plan to address revenue shortfalls.
In a statement, Dr. Mohan Suntha, president and CEO of the university system, said COVID-19 presented “unprecedented financial challenges” for the state’s health systems.
“The University of Maryland Medical System has been and remains a financially sound healthcare organization," he said. "We will continue to support our workforce while they focus on delivering world class health care during this most critical time and demonstrate appropriate stewardship through this crisis.”
The financial pinch is being felt across the country. An analysis by the American Hospital Association found that U.S. hospitals could lose more than $200 billion over a four-month period from March through June, or an average of $50.7 billion per month. With many people losing their jobs and their health insurance, the hospitals also could see an increase in unpaid bills.
The hospitals have taken various steps in response. A review by Becker’s Hospital Review found more than 240 hospitals have furloughed workers to cut costs, for example.
In Maryland, elective procedures are expected to ramp up slowly, hospital officials said, to ensure safety and ensure beds remained available for coronavirus patients. There are currently almost 1,700 hospital patients in the state with COVID-19, the illness caused by the virus.
Howfast there might be a return to normal in the emergency room was less clear.
Atlas said the declines in emergency care specifically wasn’t just a financial issue but a “dangerous trend.” He said one hospital had a decrease of almost 58% in emergency visits, including more than 51% related to heart troubles, almost 66% related to gastric disease and more than 41% related to cancer and almost 68% related to obstetrics.
“They may have misplaced concern about contracting COVID-19,” Atlas said. “We’re hoping to help people understand that they should not postpone necessary medical care and treatment for any serious health condition or disease.”
Hospital rates in Maryland are tightly regulated by a state agency called the Health Resources Cost Review Commission under a unique agreement with federal regulators. The agency said in early April that it would allow “reasonable” temporary rate increases to all patients, from those having babies to emergency heart surgery, or now getting