Iowa hospitals received $190.3 million in CARES Act relief fund payments in April and were expecting as much as $360 million more in a second round of federal relief aid underway now, interviews and documents shared with IowaWatch show.
Some of the state’s 118 hospitals also received in April advance Medicare payments worth $900 million in an accelerated payment program that requires the hospitals to pay back those funds with future Medicare billings. But the hospitals will have to repay the balance, potentially with interest, if those billings don’t cover the whole amount that was advanced.
The cash helps, especially at small, rural access care hospitals of 25 or fewer beds that have been stretched thin during the COVID-19 pandemic, hospital and industry leaders said in IowaWatch interviews. But it won’t bring them to the break-even point, even as the hospitals have resumed a major source of their income with non-emergency and clinical procedures, those interviewed said.
That’s because a lot of Iowa hospitals operated in the red before the pandemic hit. An IowaWatch review of certified financial data for each Iowa hospital showed that 44 of the 118 ended the last fiscal year for which they reported with a negative balance. Most are in small, rural regions but a few are in urban areas.
Kirk Norris, CEO and president of the Iowa Hospital Association, said modeling his association has done shows that Iowa hospitals could lose as much as $1 billion by the end of June or beginning of July because of the virus. The relief dollars from the CARES Act would make up only half the loss.
“We have a pretty good handle on what happened in March and, basically, half of their revenues evaporated,” Norris said in an interview. April wasn’t much better, IowaWatch interviews with hospital administrators showed, because state restrictions ordered by Gov. Kim Reynolds in much of March, all of April and the first part of May prohibited the hospitals from offering non-emergency surgeries and radiology procedures or other clinical visits.
Norris said industry leaders in Iowa feared at the start of this year that 10 to 15 small Iowa hospitals could be in bad enough financial condition that remaining open in the next three to five years would be difficult. “Now you have COVID, which has made their circumstances exponentially worse,” he said.
Ideally, hospitals would have enough money in reserve to handle an emergency-driven, dramatic shift in business, a nationally recognized rural health researcher at the University of Iowa College of Public Health said. “On a temporary basis, which is what we hope, you have cash reserve, you have lines of credit,” Keith Mueller, Gerhard Hartman Professor and Head of Health Management and Policy, said.
Most small rural hospitals, however, would not have as much cash on hand as larger ones, nor a strong line of credit, Mueller said. “You don’t have the same profile financially as some of the larger institutions,” he said.
Adding to the problem: Hospital administrators have not been able to predict when revenue will pick up again. Mueller said hospitals have been buying time to see how much federal assistance helps. But assistance isn’t covering all of the expenses, especially for hospitals treating COVID-19 patients, he said.
The accelerated Medicare payments will advance to participating hospitals some needed cash to cover three months of anticipated billings the hospitals would send to that federal insurance program. Critical access hospitals may seek up to 125% of their Medicare payment for a six-month period, rules for the program state.
Hospitals taking accelerated payments will, in return, credit Medicare until the advanced money is covered but must start paying back the funds 120 days after receiving them.
However, the arrangement has a kicker that could add to hospitals’ financial strain if they do not have enough Medicare billings to cover the advance payments: They would have to pay 10.25% interest on the balance owed after a certain amount of time has passed:
- Up to a year after receiving funds for critical access hospitals — which covers small, rural hospitals — inpatient acute care hospitals, cancer hospitals and children’s hospitals.
- Thirty days after the 120-day payback period ends for other healthcare providers. (Ed. Note: This sentence was changed in September 2020 to reflect updated information.)
The Center for Medicare and Medicaid Services is telling hospitals the U.S. Treasury Department set the interest rate and that it cannot waive or change the rate.
The largest total Health and Human Services payouts from two programs — the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act — as of May 13 were a little more than $34.7 million to University of Iowa Hospitals and Clinics, HHS data IowaWatch reviewed show. Catholic Health Initiatives, in Des Moines and other locations in western Iowa, was next at $13.8 million. UnityPoint Health-Iowa Lutheran Hospital, in Des Moines, was next at $13.2 million, the data showed.
CARES Act payouts were based on annualized patient revenue, thus the largest payments went to Iowa’s largest hospitals. Hospitals have collected $362.7 million of the $383.3 million distributed so far for Iowa’s rural hospitals, clinics and community health centers, the IowaWatch review of disbursements showed.
DEMAND FOR CASH, PEOPLE RESOURCES
Administrators at MercyOne Elkader Medical Center in northeast Iowa, like those at other hospitals, spent the first part of 2020 rearranging staff to deal with COVID-19. Leaders balanced demands created by the need to address a pending surge in virus cases while income-producing non-emergency surgeries and many clinical appointments were cancelled.
“Going into COVID-19, the month prior to this I was exceeding budget for this fiscal year,” Brooke Kensinger, the hospital’s CEO, said. “But everything is somewhat fragile in critical access environments due to the way that we’re paid from different payers, whether that’s Medicare or Medicaid, or Wellmark or UnitedHealthCare. And the margins that we’re making are just very, very thin, so we really have to be creative in how we staff facilities like mine.”
The hospital staffs the facility with three employed health care providers – one medical doctor and two nurse practitioners who have expanded medical training and authority to write pharmacy prescriptions – and partners with Medical Associates Clinic in Elkader, independent contractors and employment agencies. The hospital partners with Avera eEmergency in its emergency room and eHospitalist services on its inpatient floor.
The hospital avoided layoffs, furloughs and reductions in staff work time from full-time to part-time hours. Other individual hospitals in the state, including in the MercyOne and UnityPoint networks, have laid off staff, put some on furloughs and cut executives’ pay this spring.
Elkader’s hospital, in a county seat with 1,215 people, is better off that some rural Iowa hospitals. It showed net income of $119,875 in the fiscal year ending June 30, 2019, a hospital records database compiled by American Hospital Directory shows. The hospital’s budgets for almost all of July 1, 2015-June 30, 2019 were in the black, except for a $53,987 deficit in fiscal 2018 when the hospital made investments in staffing and operations. That was Kensinger’s first full year as hospital CEO. The deficit was smaller than any recorded by Iowa hospitals in the most recent reports.
Kensinger said she felt fortunate that the 25-bed critical access hospital she heads became part of the MercyOne system in October 2018. Hospitals in MercyOne started talking in late February about ways to respond to the pending COVID-19 outbreak and share resources, she said.
Dr. Clark Williams, the hospital’s emergency room medical director and director of MercyOne Elkader Ambulance Service, said preparing for the unknown has been stressful. “It’s kind of this sense of anticipation, waiting for it arrive without really having a full understanding of the severity. And then, I think probably the biggest stress on a day-today basis is just using all the PPEs,” he said, referring to personal protective equipment.
What usually was a routine task – walking into a room and asking patients how they feel, for example – became a time-consuming production of scrubbing and donning the gear, Williams said. Plus, hospital leaders want to make sure they had enough gear, which has been the case, thus far.
Clayton County, where Elkader exists and which has one other small hospital in Guttenberg, has had 30 positive COVID-19 cases and three deaths, data on May 18 from the Iowa Department of Public Health showed. The Guttenberg hospital has received a little less than $3.9 million in relief so far, HHS data show.
Hospital industry officials said the HHS data will be updated as the federal government sends more relief funds.
THIN MARGINS BEFORE COVID-19
The American Hospital Directory data show 23 Iowa hospitals reporting losses of more than $1 million for their last audited reporting period. Patient billings are down but non-patient revenue keeps the spending deficit from being worse. Non-patient revenue comes from people using a hospital service, such getting a lab report about a specimen delivered to the hospital instead of being taken there.
The 41-bed UnityPoint Health in Marshalltown, which closed its obstetrics and women’s health clinic last year, lost $8.5 million in its fiscal year ending Dec. 31, 2018, financial data IowaWatch viewed in the American Hospital Directory database showed. Federal relief had provided the hospital with $1.1 million as of May 13, the HHS data show.
On the other hand, Hansen Family Hospital, in Iowa Falls, finished the fiscal year that ended June 30, 2019, with $2.3 million earned, up from $671,960 in the black in fiscal 2018 and only $38,257 in fiscal 2017. Officials at that hospital have cut expenses and worked over the past few years to bring the hospital into better financial shape, a series of Iowa Falls Times-Citizen reports showed. The hospital has received $4.3 million in federal relief, HHS data show.
Community Memorial Hospital in Sumner, a town of 2,000 people in northeast Iowa, has received $379,240 so far in federal relief, HHS data show.
“We came into the year very stable,” Dawn Everding, president and chief financial officer at the hospital, said in an interview. “But, it did not take very long to have a reduction in our revenue – about 50 percent in the month of April.”
Everding’s 16-bed hospital, which serves an area extending 45 miles in each direction from Sumner, has four medical doctors on staff, five advanced practitioners, around a dozen nurses and medical technicians for things such as lab work and X-rays. The American Hospital Directory database showed it ending 2018, the last year for which it has filed an audited financial report, with a $177,101 deficit.
Elective surgeries had been done at the hospital in mid-March but those scheduled for later had to be postponed when Reynolds suspended elective surgeries in Iowa. “It just happened very fast, as it did for everyone,” Everding said about the abrupt change in how the hospital did business.
Everding said she is helped by being part of the UnityPoint system with ties to the larger Waterloo UnityPoint. Her hospital had time to prepare for a large COVID-19 surge that has not materialized in the hospital’s coverage area. The wait has been taxing.
“You go one week at a time,” Everding said. “Sometimes you go a day at a time and, like: OK, it’s not here, yet. And then it’s like: We wish it would get here just so we could deal with it.”
Sumner borders the Bremer-Fayette county line. Bremer County had 64 positive COVID-19 cases and five deaths as of May 18; Fayette County had 25 reported cases and no reported deaths, state data showed.
The 22-bed Washington County Hospitals & Clinics deployed a special Incident Command approach on March 12 to deal with the changes in what that southeast Iowa regional hospital in the town of Washington offered for health care. That gave the hospital a clear chain of command to plan, implement and oversee logistics, finance and operations necessary during this large-scale event, hospital CEO Todd Patterson said via email for IowaWatch.
“We had to completely shutter normal operations to focus on treating and testing COVID-19 patients,” Patterson said.
“One of our biggest challenges has been the underlying fear and concern in our community and, more broadly, making it difficult to work in this environment,” he said.
Incident Command team members met daily through April 24 before reducing that to twice weekly to review the latest information from the Centers for Disease Prevention and Control, World Health Organization, Iowa Department of Public Health and other sources team members trusted for reliable best practices and protocols. Hospital leaders felt in early March that they were prepared, Patterson said.
The hospital increased its orders for PPEs and established a Respiratory Triage Clinic to do drive-in testing, by appointment, at its east wing until early May, when testing moved to another part of the building. The hospital resumed non-emergency, elective surgeries in early May after Reynolds lifted the ban on them.
Some hospital staff were put on furlough but the hospital has been bringing them back, Amy Vetter, the hospital foundation and marketing director, said. Vetter said the foundation is in a “Healthcare Heroes” fund drive to recover some of the hospital’s lost revenue and is getting a good response. Signs for the drive are in yards around the town of Washington, population 7,300.
Even determining a goal for the find drive has been difficult, Vetter said. “We’re kind of planning this ongoing campaign and, you know, we’ll keep working at it to see what we can do for the hospital,” she said. The foundation already has provided funding to buy PPE masks and other needed items, she said.
Washington County had reported 172 positive COVID-19 tests as of May 18, with eight deaths.
The Washington hospital completed its last fiscal year, which ended June 30, 2019, with a $495,241 deficit, the American Hospital Directory database showed. But Patterson said the audited statement included a large non-cash expense for the hospital’s pension plan. “It’s more accurate to say we broke even in FY2019,” he wrote in an email.
The hospital has received $737,412 in federal relief, the HHS data show. It won’t make up for lost revenue, Patterson said.
“For roughly seven weeks during the months of March, April and May, our patient volume and gross revenues have been about 70% less than our normal run rate. We expect the stimulus money to provide significant help to us but we can’t say yet if it will completely cover our lost revenue.”
This story is part of a collaboration of Institute for Nonprofit News members examining the effect of COVID-19 on rural health care. Partners are IowaWatch, Side Effects Media, Wisconsin Watch and Reveal from the Center for Investigative Reporting. IowaWatch reporting in this project was made possible by support from the Solutions Journalism Network, a nonprofit organization dedicated to rigorous and compelling reporting about responses to social problems. Read the collaboration’s work here: Slammed: Rural health care and COVID-19.
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This story was published by Iowa Public Radio’s website, the Des Moines Register, The Gazette (Cedar Rapids, IA), Marshalltown Times-Republican, Mason City Globe Gazette, DeWitt Observer, Oskaloosa News and Business Record (Des Moines) under IowaWatch’s mission of sharing stories with media partners. Also, the Cherokee (IA) News Patriot included reporting from this story under that IowaWatch mission.