A recent infusion of federal funds is providing much-needed relief for rural hospitals already under financial pressure when the coronavirus crisis hit Colorado.
Though hospital administrators say the emergency funds will provide immediate support, there is uncertainty around how and when the funds can be used, specifically if they can be used to make up for the steep decrease in revenue –– nearly 70% in some cases –– spurred by the halting of elective surgeries throughout March and April. The state’s rural hospitals saw a 268% decrease in profit in March compared to last year, according to an analysis from the Colorado Hospital Association.
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“The funds will help a lot, but one of the biggest problems still with all of the funding mechanisms that are coming in is some of those stipulations aren’t quite clear about what they can and cannot be spent upon,” said Melissa Bosworth, executive director for the Eastern Plains Healthcare Consortium.
Last week, Colorado’s rural hospitals, clinics and community health centers received $188 million of federal coronavirus assistance from the U.S. Department of Health and Human Services. Though the funds will help in the short term, it’s unclear how far they can stretch to keep many rural hospitals from closing their doors.
“Our hospitals have lost over 70% of their revenue just in the half of March alone,” Bosworth said. “A lot of them are starting to offer elective surgeries again, if they haven’t already done so, with additional precautions, but we are all trying to use a crystal ball here.”
Bosworth said the proposed state budget cuts to Medicaid services will add additional challenges for rural hospitals. “I think anytime there’s a cut in reimbursement, whether it’s Medicaid or Medicare or commercial funding, it hits our hospitals the hardest,” she said.
“A few hundred thousand dollars might not be much for a hospital in Aspen or Denver or Fort Collins, but it can be absolutely detrimental for one of our rural hospitals,” Bosworth said.
Many rural hospitals were financially strained before the pandemic
Before the most recent funding was announced, the Colorado Rural Health Center, the state’s nonprofit office of rural health, released a report that stated 18 of the 42 rural Colorado hospitals were operating at a loss in 2019.
Since the coronavirus hit, some hospitals are reporting revenue losses greater than 50% at the same time expenses increased to purchase additional personal protective equipment and other supplies in response to the pandemic.
“A number of our rural hospitals were facing difficult financial conditions before we even saw COVID in our state,” said Cara Welch, communications director for the Colorado Hospital Association. “Many were below what’s considered a sustainability threshold of a 4% profit margin.”
Unlike urban systems, rural hospitals serve as catch-all health care providers, often including services such as primary care, prescription refills, chiropractic services, long-term care and physical therapy.
Most rural hospitals rely heavily on revenue from elective surgeries and emergency visits. “People aren’t driving as much, we don’t have as many accidents,” Welch said. “People are out and about less. And unfortunately, people have been delaying even emergency room visits, sometimes to the detriment of their health.”
Matt Huff, chief financial officer for Banner Health’s Western Division, a nonprofit health system that operates hospitals and clinics in Larimer and Weld counties, said rural hospitals are accustomed to carefully monitoring their revenue and expenses.
“Stopping elective procedures for the past several weeks will impact revenue, but we are now slowly restarting those and working toward normal operations,” Huff said. “Three of our hospitals are in hot spots with COVID-19 outbreaks, so it’s too early to know the overall financial impact.”
“It saved us”: Federal funds brings temporary relief to rural hospitals
Colorado has 32 critical-access hospitals that are licensed to have 25 beds or less. To qualify as a critical-access hospital, the small clinics must be 35 miles from the next closest hospital — or 15 miles of mountainous terrain away.
When the federal Paycheck Protection Program was first announced, critical access hospitals were not able to apply. That recently changed, and many rural hospitals are now using the loans to help cover payroll and avoid layoffs or furloughs.
“I think, speaking candidly for us, we are probably better off than many,” said Andy Daniels, CEO of Craig’s Memorial Regional Hospital. “It’s pretty ugly … across the state, especially in the rural areas, we’re seeing 40 to 60% volume drop off.”
He said his hospital system, which serves approximately 12,000 people in Moffat County, received about $4 million as part of the Provider Relief Fund announced last week. Daniels hasn’t had to furlough or lay off any staff, but the community hospital’s financial situation remains precarious.
When asked if the hospital system had any cash reserves on hand, Daniels laughed.
“No. We have no cash,” he said. “We are one of those hospitals that has less than 10 days cash on hand at any given time.”
Daniels said the federal funding kept the hospital from closing its doors. “It saved us,” he said. But he estimates that the funding will only get Craig Memorial through the next three months.
“Hopefully, as things get a little better, June will not be quite as bad,” Daniels said. “Assuming we’re coming out of this thing sometime in June or July, I think we’re going to make it. If things get turned upside down again, it could be interesting.”
He said he thinks that Gov. Jared Polis has done a good job taking rural health care providers’ unique needs into account during the coronavirus crisis. “He’s done it smart. I think he’s handled this very well,” Daniels said. “And that’s coming from somebody who bleeds red.”
But many rural hospitals still face an uncertain future
Kevin Stansbury, CEO of the Lincoln Community Hospital and Care Center in Hugo, said the federal funding provided much-needed relief. But he’s still worried about the future.
The hospital lost $400,000 in revenue in March. “April was worse, but we’re still working on those numbers,” he said, adding that his monthly payroll is about $500,000.
Stansbury’s hospital operates a 15-bed critical access hospital, a 35-bed nursing home, and a 10-bed assisted living facility. Craig Memorial also operates three primary care clinics, a specialty clinic, and home health and hospice service.
He said his county has been lucky to not be hit as hard by the coronavirus. As of May 11, there were three confirmed cases of the coronavirus in Lincoln County and no deaths. “By contrast, Kit Carson County, which is just to the east of us, has over 20 confirmed cases and they’ve had three deaths in their county,” Stansbury said.
His hospital has received nearly $4 million in federal assistance: $400,000 that was distributed in early April from the CARES Act and $3.4 million in the latest allocation. Stansbury said he’s wary to rely on the most recent funds from the Provider Relief Fund because it’s unclear how the funds can be used.
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“So we’ve gotten some advice that says that generally, as long as you can show a relationship between your lost revenue and your increased expenses due to the COVID-19 pandemic, you’re going to be OK,” Stansbury said.
“But the terms and conditions seem to be more specific than that. To the point that I got a fairly urgent call from my attorney last week saying, ‘don’t sign the terms and conditions yet, because they’re changing once again,’” he said. “So we’re nervous about that.”
Stansbury was also able to avoid layoffs thanks to the federal Paycheck Protection Program, but he said his staff of about 150 has voluntarily scaled back on hours to decrease the hospital’s expenses.
The hospital has received about a half a dozen recovering coronavirus patients from the metro area. “And that helps us with our revenue in order to sustain some volume and take care of those patients who need it and didn’t have anywhere else to go,” Stansbury said.
The financial outlook of the hospital changes daily. His team is reworking their 2020 budget to try to account for significantly less revenue and increased expenses from acquiring PPE and coronavirus supplies.
“So we’re just kind of watching to see what happens,” Stansbury said. “But I can tell you, our expenses have gone up probably 15-20% and our gross revenue has gone down, depending on the service line, by as much as 50%.”
A couple years ago, the Lincoln Community was facing closure and administrators were forced to significantly reduce costs. “There’s just no more for me to cut,” Stansbury said. “We feel like we’re a pretty low-cost operator to begin with, and I would not be able to cut any more expenses without closing services.”
Stansbury said he hopes the recent changes to telehealth last beyond the pandemic to help boost revenues. He said before the coronavirus crisis, patients and providers were reluctant to adopt the remote health service. The technology was expensive and the regulations were strict.
“The coronavirus cleaned that up in about a week’s time,” Stansbury said. “Suddenly the payment was very clear. The technology was cleaned up because the government dropped a bunch of their rules and regulations surrounding telemedicine, and both providers and patients found they loved it, to the point that right now about 40% of our clinic volume is being done on telemedicine visits.”
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Welch said it’s hard to plan for the financial future of hospital systems, especially rural ones, when so much is still unknown about the coronavirus pandemic. She’s worried about how long hospitals can sustain this level of preparedness and response to the coronavirus.
“Certainly, it’s been incredibly hard for the hospital workforce and for the staff to continue this level of vigilance and care, and it’s been incredibly stressful for their health and their mental health,” Welch said.
She said her organization is starting to plan for a potential second wave of the coronavirus.
“There’s a lot of different modeling out there and everyone’s trying to figure out when we might see another surge, if there is going to be another surge. But either way, we have to be prepared for that.”