Butler Health System loses millions in COVID-19 costs
Butler Health System is laying off and furloughing 67 people, closing a skilled nursing facility, and eliminating 60 vacant positions to try to close a $19.3 million budget hole — joining a host of hospitals in the state hit hard financially by the COVID-19 pandemic.
“Increased costs have combined with severely decreased revenues, resulting in BHS losing tens of millions of dollars over the past several months,” the health system said in a statement earlier this week.
Like virtually every community hospital in Western Pennsylvania, BHS’ Butler Memorial and Clarion hospitals have been stressed by the increased costs of preparing for a surge in COVID19 patients and sharply falling revenue from the state’s moratorium on nonemergency medical procedures.
The virus pandemic cost the Butler-based system $35 million in just 2½ months, not including higher expenses, CEO Ken DeFurio said during a briefing Tuesday that was sponsored by the Hospital and Healthsystem Association of Pennsylvania, a Harrisburg-based trade group.
“We are a long way from filling that financial hole,” Mr. DeFurio said, despite receiving $20 million in federal aid.
“The virus is still out there. We’re seeing spikes throughout the country and it’s very likely we’ll see a resurgence.”
The Hospital and Healthsystem Association of Pennsylvania has been lobbying the state Legislature to allocate $1.3 billion in federal dollars to prop up ailing hospitals. The funds are in addition to $1.4 billion that has already been distributed to about 240 hospitals statewide through the federal Coronavirus Aid, Relief and Economic Security Act and $323.6 million that 17 rural hospitals received through the act, which was signed into law March 27.
Another $231 million in CARES Act money was distributed to other providers, including rural health clinics.
In all, Pennsylvania hospitals were expected to receive $3 billion in aid, which compares to a $10.2 billion loss that hospitals were expected to suffer this year as a result of the COVID-19 pandemic, according to the hospital association.
Butler Health System reported an operating loss of $19.3 million for the fiscal year to date ending March 31, a sharp increase from a loss of $879,581 reported for the same period a year ago. Operating revenue was down 1.6% to $256 million from $260 million a year ago while operating expenses rose 5.5% to $275.3 million from $261 million in 2019.
BHS joins community hospitals Washington Health System, Heritage Valley Health System and Excela Health in reporting steep operating losses from preparing for the public health emergency March through May. The peak of the COVID-19 outbreak in Western Pennsylvania came in April, but without a hospital surge in patients.
In addition to reduced revenue from canceling non-emergency medical tests and procedures, the hospitals faced higher costs for protective equipment for nurses and doctors due to supply shortages, which increased prices.
Community hospitals have not been the only providers stung by the COVID-19 slowdown. In May, Allegheny Health Network announced the layoff of 250 people due to the pandemic.
At BHS, the shutdown of non-emergency care by the state March 19 cut patient volume well below 50%, Mr. DeFurio said. Since the ban was lifted April 27, patient volume has risen to 70% capacity, with 85% to 90% capacity anticipated within six months.
“By in large, we are open for business,” Mr. DeFurio said.
Of the 67 employees affected by the layoffs and furloughs, only 10 are expected to eventually return to work, according to the health system.
Citing weak financials, Moody’s Investors Service in March downgraded the Butler Health System rating on about $84 million in debt to Baa2, negative outlook, from Baa1, stable outlook. The rating outlook downgrade was attributed to the system’s “precipitous decline in financial performance” this year.