Hospitals Reporting Steep Revenue Losses Due to COVID-19

State hospital leader calls Montana an “island of public-health success” with low infection rate, but response has come at financial cost

By Myers Reece
Kalispell Regional Healthcare. Hunter D’Antuono | Flathead Beacon

Health-care officials say Montana hospitals have been critical to a COVID-19 response that has kept the state’s per-capita infection rate among the lowest in the nation, but the flipside of that response for hospitals has been significant revenue declines.

The Montana Hospital Association (MHA) estimates that state hospitals lost at least $150 million during the first three weeks of the pandemic. More precise and detailed figures are expected in the coming days as the MHA wraps up a statewide survey.

The losses stem from hospitals shifting resources to combat COVID-19 and taking steps to prepare for potential surges in patients suffering from the disease. That includes ceasing elective surgeries, which generate substantial revenue for hospitals, and either limiting or eliminating other services, as well as spending money on COVID-19 supplies such as protective equipment.

Kalispell Regional Healthcare recently announced the furloughs of roughly 600 employees, as well as pay cuts for physicians and administrators, in anticipation of revenue losses projected to total $16 million per month. KRH officials said without immediate action those shortfalls “could jeopardize the organization’s ability to serve the long-term health needs of our community.”

While there haven’t been reports of other large-scale furloughs or layoffs at Montana hospitals, MHA President and CEO Rich Rasmussen said health-care facilities across the state are working to address similarly substantial revenue losses by reducing staff hours, reassigning employees and making other adjustments.

Nationally, the nonprofit research organization Altarum reported that the U.S. shed 43,000 health-care jobs in March alone, which is “unlike anything we have seen at the start of a recession over the past three decades,” with health care typically being one of the most recession-resistant industries. And the Becker’s Hospital CFO Report counted 150 hospitals that had furloughed employees nationwide as of April 20, including KRH.

“Kalispell is no different than what’s going on in most communities across America,” Rasmussen said.

But Rasmussen emphasized that Montana’s response has worked. Initial worst-case projections called for the state experiencing more than 10,000 hospitalizations and nearly 300 deaths, which could have overwhelmed a state with about 3,000 hospital beds and 200 ICU beds altogether. As the curve flattened, projections were revised down to 22 deaths, and as of April 20 Montana had seen only 57 hospitalizations and 11 deaths.

Rasmussen attributed that rosier outlook to robust state and local measures, such as stay-at-home and tourism restrictions, as well as efforts by hospitals and public-health departments. According to the John Hopkins University Coronavirus Resource Center, as of April 17 Montana had the third-lowest per-capita infection rate of any U.S. state, closely trailing Hawaii and Minnesota.

“If you compare us to our neighbors, we are an island of public-health success,” Rasmussen said. “That’s a success story we should all be celebrating.”

Rasmussen said hospitals understood the financial implications of ceasing elective surgeries and other coronavirus preparation measures.

“They knew in doing that there would be a financial loss coming to them,” he said. “But they did it because it was the right thing.”

Any long-term fallout would be impactful in Montana, where health care is increasingly a primary economic driver. The University of Montana Bureau of Business and Economic Research (BBER) published a hospital economic-impact report last year, which found that Montana’s non-government hospitals employed 24,526 employees with a payroll of $1.5 billion in 2017, accounting for 10% of total private-sector wages.

“When one includes other health care entities choosing to locate near Montana’s hospitals, the agglomeration economy, private employment jumps to 18 percent of total private employment and 21 percent of Montana’s total private wages paid for 2017,” the report stated.

Then, of course, there are the human-health impacts of losing hospital capacity and access. And even human health can be quantified in economic terms, according to the report, which states that “healthy populations are not only more productive but also can direct more dollars to other sectors in the economy, creating jobs and income.”

The report described hospitals’ economic multiplier effect, which Rasmussen said pencils out to roughly a three-to-one ratio in community purchase through hospital spending. That means $150 million in lost revenue equals close to half a billion dollars in impact to the state’s GDP, Rasmussen said.

Gregg Davis, an economist at Flathead Valley Community College who has conducted health-care research for the BBER, notes the pronounced reverberation effect of an institution like KRH, which broadly has higher-paying jobs and an outsized role in the Flathead Valley economy.

“The longer the shutdown occurs, the greater will be the adverse cumulative effect on both directly and indirectly related jobs in the economy,” Davis said.

According to KRH employees, the furloughs that began on April 15 impacted a broad range of departments, hospitals and clinics under the health-care system’s umbrella, including at least 60 nurses, who are currently engaged in collective-bargaining negotiations through the SEIU Healthcare 1199NW.

While Rasmussen appreciated the federal stimulus act’s efforts to infuse money into hospitals, he said it was “woefully inadequate” in addressing rural hospitals’ unique operational and financial structures. He hopes the next round of stimulus will fix the fund distribution methodology.

Of the state’s 49 critical-access hospitals, a classification that doesn’t include Montana’s bigger urban hospitals, Rasmussen said 25 generate less than $10 million in patient revenue.

“That means a majority of our critical-access hospitals generate less revenue than your average local Home Depot,” he said. “Their ability to financially sustain themselves is going to be challenged.”

Noting that Montana’s large hospitals are also taking significant financial hits, Rasmussen said he hopes the pandemic will lead to the modernization of statutes to better prepare for future crises and generally update care delivery. He pointed to allowing for increased telehealth as an example.

“It’s just a question of how we improve the system going forward,” Rasmussen said. “Public health is a big part of it, too. We need to ask, ‘How do we modernize our statutes and regulations moving forward?’”