Cost of Care: 2020 hit hospital bottom lines as demand for COVID-19 care stretched operations

Jake McWay: Costly COVID-19 treatments directly hit bottom line.

Gary Fulbright: Some patients are reluctant to return to in-person appointments.

Craig McCoy: Mercy received $42 million in coronavirus aid.

• 
• 
• 

When the COVID-19 pandemic arrived in the Ozarks, it shut down most revenue streams for area hospitals almost overnight.

As CoxHealth, Mercy Springfield Communities and Citizens Memorial Hospital scrambled to respond, leaders say they did so without the money that typically flows from elective surgeries and other procedures, health screenings such as mammograms and colonoscopies, and even emergency department visits.

It all just stopped.

At the same time, the health systems spent more in order to prepare to treat an influx of COVID-19 patients, and the prices for much of what they needed skyrocketed.

The American Hospital Association trade group estimates hospitals nationwide lost $320 billion in revenue in 2020, with $51 billion a month lost March-June alone.

Regionally, hospital executives say a combination of money through the coronavirus relief bill and a history of prudent fiscal moves have helped buffer the losses but revenues remain far below pre-pandemic levels.

A series of blows
At CoxHealth, Chief Financial Officer Jake McWay described March 2020 as hitting a fiscal brick wall.

“Volumes dropped 25% in some areas, 65% in other areas – just overnight,” he said.

McWay estimated during the critical period of mid-March through May, revenue was down about $75 million.

Mercy’s losses in the Springfield region were even greater. President Craig McCoy said the health care system was down more than $150 million during the same time.

In the months following the pandemic, Cox and CMH opted to retain employees while Mercy stanched losses by laying off nearly 700 employees, announcing early retirements and a 26% pay cut for the hospital’s leaders.

Each of the hospitals received Coronavirus Aid, Relief and Economic Security Act funding to mitigate the losses. Mercy received $42 million, Cox received $28 million and CMH CEO Gary Fulbright said the Bolivar system received $15 million.

“Without that, it would have been very tough,” Fulbright said.

While each of the systems took on initial expenditures for adding beds and equipment, executives say ongoing expenses created a greater problem.

They all cite the same issues: additional staffing, personal protective equipment, expensive medicines, such as remdesivir for COVID-19 treatment, increased staffing needs and the intense labor demands of treating COVID-19 patients.

The trouble with PPE was not only price spikes in conjunction with demand, but also the volume of staff required to care for COVID-19 patients ballooned.

McCoy said prior to the pandemic, Mercy had enough N95 respirators to last 117 days. “When COVID hit and we put PPE precautions in place, we went through that supply in seven days,” he said, adding the price increased tenfold.

An AHA report showed that PPE prices went from a pre-pandemic level of 35 cents per bed per day to $25.58 per bed per day.

The pandemic also ushered in needs for new jobs.

“From patients themselves to people who have to be in place to watch other staff put on and off protective equipment, screeners at the door, managers devoting their time now to dealing with the response – there’s just a lot of people devoted to working on this,” CoxHealth’s McWay said.

And some staffing is more affordable than others.

In order to meet the needs of patients suffering from COVID-19 and fill in gaps from ailing skilled-care providers, hospitals turned to agencies that provide travel nurses and other care providers.

The cost of a travel nurse has gone from about $60 an hour to as high as $200 an hour, the executives report.

“We are $1.5 million a week above what we expected on contract labor,” McWay said.

As with anything, the cost is about supply and demand.

“It wasn’t as big of an issue over the summer. In the spring, the Northeast had a surge. In summer, it was the South,” he added. “Then what happened in the fall/winter, the entire country had one. We had an unbelievable demand for travel nurses and staff.”

Then there’s the price of treating COVID-19 patients.

“One of the things not being talked about enough is the cost of drugs to treat these patients. It’s very high and we’ve had to accumulate a great supply,” McWay said, noting remdesivir can cost $3,000 per patient.

McCoy said that while Medicare pays a bit more for COVID-19 patients, “remdesivir and PPE eat through that 20% very, very quickly.”

“It’s not something that’s even a break-even service line,” he added.

Finding an equilibrium
Hospital executives say while they have good safety protocols, such as temperature check stations, sanitation procedures and masking requirements, patients remain wary of visiting clinics.

“There’s a certain population that’s reluctant to get in health care if they don’t have to,” CMH’s Fulbright said.

He said providers are contacting patients, encouraging them to go in for annual physicals, colonoscopies and other screenings, but the response has been tepid.

McCoy said telemedicine has helped Mercy providers connect with and continue to treat patients.

“If there’s a silver lining to COVID, it’s things that came out that really forced a change in business in rapid fashion. When the government made changes in the reimbursement for video visits, that changed the business dramatically,” he said.

Even visits to the emergency departments remain down 15%-20% from pre-pandemic levels, McCoy said.

McWay and Fulbright say that’s also true at their systems, and when patients do show up they tend to be sicker.

Even so, demand for non-COVID-19 beds remains about 20% below normal, McWay said.

Each of the executives pin hopes for a rosier financial picture on the vaccine. Until the community reaches 70% inoculation rate, herd immunity won’t be achieved.

“We’ve got to roll out the vaccine. The challenge for us is … the health systems are fully prepared to vaccinate large portions of people, but we can’t get the vaccine,” McCoy said.

“The supply that we get to us every two weeks, we can administer in two days or less. There doesn’t seem to be a good answer in what’s happening in that supply chain.”

McWay said he hopes things will at least stabilize so he can start to pare expenses, although he expects it to take a while.

“There’s going to be a certain level (of COVID-19) in the picture ongoing,” McWay said.

“But that also means that we’ve built up and staffed up at these higher levels, so we have to be very diligent in bringing that back down, letting temporary costs roll off.”