Hospitals report steep losses
$246 million in three months of coronavirus pandemic
In its most recent bond disclosure, Tower Health reported steep losses due to the coronavirus.
From March through June, the West Readingbased health system lost $246 million. The revenue was $382 million but its expenses were $628 million, according to the filing. That’s an operating margin of minus 64%.
The disclosure gives a more recent picture of the hospital system’s struggle to stem losses during the pandemic.
“Tower Health’s FY20 financial performance reflects the devastating impact of the COVID-19 pandemic on health care providers,” said Richard Wells, system director, corporate communications & government relations, in an email statement. “In March and April, compliance with government mandates to suspend elective procedures and close many outpatient facilities and physician practices resulted in a 40 percent decline in revenue for the system. At the same time, we increased spending on COVID-19 related supplies, equipment, and staff support. Even with the gradual re-opening that occurred in May and June, revenues remained down by approximately 20 percent.”
The system finished its fiscal year with an operating loss of $378 million, double its loss of 2019 of $179 million.
It had closed five of its 20 urgent care centers to dedicate them to COVID-19 testing — and the state had put a moratorium on nonemergency surgery. Tower estimated the closure caused a 40 percent drop in system revenue — representing more than $212 million in lost revenue through
May.
Before coronavirus-induced shutdowns closed all but the most crucial medical services, Tower was wrestling with integrating the five hospitals it purchased from Tennesseebased Community Health Systems.
It had to write off millions in debts it could not collect and spend millions to integrate the hospitals into its digital record system.
In May 2017, Reading Health System purchased Pottstown Memorial Medical Center, Pottstown; Brandywine Hospital, Coatesville; Phoenixville Hospital, Phoenixville; Jennersville Regional Hospital, West Grove; and Chestnut Hill Hospital, Philadelphia. It was rebranded as Tower Health.
In addition to furloughs and layoffs, the losses have led Tower to address the devastating financial impact with program closures and restructuring. The changes have rippled through the communities it serves in Berks, Montgomery, Chester and Philadelphia counties.
In June, the nonprofit health care system finalized a deal to free up $200 million by selling 24 properties to a Chicago investment firm and leasing them from that firm.
The deal had actually been in the works before the coronavirus hit Pennsylvania but Tower said the financial impact of the pandemic accelerated the need “to unlock capital and strengthen the system’s balance sheet.”
Tower furloughed employees in April.
Then, on June 16, it announced it would cut 1,000 jobs. The layoffs cut across Tower Health, eliminating positions in executive, management, clinical and support areas. About 10 percent were unfilled, Tower said.
As patients return, the furloughed employees have been recalled.
“Tower Health has taken aggressive actions to strengthen its financial performance, including a difficult but necessary reduction in force and the closure of some services,” Wells said in the email statement. “Almost all staff furloughed in April have been recalled and we continue to assess staffing needs as volumes return. We have benefited from federal support and have taken steps to strengthen our liquidity and balance sheet.”
In the March-June period, Tower added about $500 million to its cash position.
About $260 million of federal stimulus funds have been received since April, including $98 million in grants, primarily from The CARES Act. Tower also received $165 million of Advanced Medicare receipts in a onetime distribution in April, which will need to be repaid.
The bond disclosure shows Reading Hospital with about a $77 million operating profit for fiscal 2020 while the hospitals Tower bought in 2017 have an operating loss of $183 million.
Tower Health Medical Group’s operating loss was $244 million for the year. That is the system’s network of physicians and offices.
Wells said patients are returning but the system has not returned to prepandemic levels.
Experts don’t expect them to.
“We continue to invest in the safety and quality of our clinical services and have implemented comprehensive procedures to ensure our facilities are clean, safe, and welcoming for patients seeking care,” Wells said. “Since government restrictions were lifted, our patient volumes have rebounded across the system, but are not yet at prepandemic levels. We have also aggressively expanded digital and telehealth platforms to improve access to care for the public.”