Federal bailout funds intended to help the U.S. health care system survive the COVID-19 pandemic have covered a little less than one-third of the financial losses suffered by Maine’s three dozen hospitals since mid-March, when the deadly virus forced them to stop treating all but the sickest patients.
Maine hospitals began losing about $250 million a month after suspending elective and preventative care, said Steven Michaud, president of the Maine Hospital Association. Patient volumes fell to half their normal levels. Yet the hospitals have received only $225 million from the federal Provider Relief Fund to date, federal records show.
Maine hospitals are hoping more bailout funds and a resumption of traditional care will help make them whole. Patient volumes are back up to 75 percent, a good sign, but most Maine hospitals can’t afford to wait. They’re dipping into their financial reserves, delaying building projects, laying off workers and taking out loans against future Medicare payments to stay afloat.
Steven Michaud, president of Maine Hospital Association Kennebec Journal photo by Joe Phelan Buy this Photo
“We are in big trouble,” Michaud said. “The losses are staggering. They are frightening. Things are starting to get better, but very slowly. People are skittish about coming back. … I think we are only starting to see the financial consequences of this. I don’t know how we come back from it. I don’t know if that’s even possible.”
Some worry a big chunk of the commercially insured care that enables Maine’s nonprofit hospitals to break even has been lost for good. After all, while a faulty hip must eventually get replaced, no one gets two annual physicals. Some patients who have had to use telehealth or urgent care to get medical care during the pandemic may not return to hospitals, either.
Congress created a $175 billion Provider Relief Fund within the CARES Act to help U.S. hospitals, clinics and doctors survive the financial losses of deferred care, as well as respond to the pandemic itself, but it has not been enough. Michaud estimates Maine hospitals have received enough Provider Relief Fund money to cover a month’s worth of their losses.
That’s just the revenue side of the books, he notes. Nobody has even had time to track how much COVID-19 has driven up costs.
The Maine Hospital Association has joined a national chorus of health care groups calling on Congress to distribute the Provider Relief Fund to ailing health care providers as quickly as possible. The U.S. Health and Human Services Department has awarded $125 billion of it so far, sending out money in allocation waves targeting different aid to different groups.
Maine has received about $323 million from the Provider Relief Fund to date, distributed among 963 providers that range from rural ambulance services to well-heeled private practices to urban hospitals that employ thousands and operated COVID-19-only intensive care units. The first payment of $146 million to Maine went out in early April.
The first round was distributed using Medicare reimbursement rates – a formula readily available to federal agencies – to get the money into the hands of providers as quickly as possible. With Maine’s demographics, local hospitals did well in that first round. According to Michaud, Medicare accounts for about half of all revenues for Maine hospitals.
So far, Maine’s 36 hospitals have received about $225 million of that $323 million, or 70 percent, according to the latest federal statistics. Awards varied from hospital to hospital, from less than $500,000 for a 25-bed facility such as Rumford Hospital to as much as $69.8 million for MaineHealth, a nine-hospital network that includes the state’s largest medical center.
While bailout amounts vary by hospital, the ratio of what that bailout covers – about a month’s worth of lost revenue – is universal, Michaud said. The MaineHealth network, including its New Hampshire hospital, has been losing $100 million a month since the pandemic hit, and to date the network has received $98 million in Provider Relief Funds.
Follow-up disbursement rounds have targeted COVID-19 hot spots, rural providers and nursing homes. No Maine hospital treated enough COVID-19 patients to qualify for hot spot money, but 121 Maine health care providers, including hospitals, received $131 million in rural provider subsidies and 65 nursing homes have received $17 million.
And just last week HHS announced that its latest round of Provider Relief Fund disbursements would go to so-called safety net hospitals that treat mostly Medicaid-dependent patients. The agency said it will deposit another $52.2 million into bank accounts of eight Maine hospitals soon, if it has not already showed up, but it would not say which ones.
An HHS spokesman said the next round of Provider Relief Fund money will likely go to dentists, but didn’t give any more details.
To cover what the bailout does not, Maine hospitals are turning to advance Medicare payments for reimbursable services they are likely to perform in the future. These are essentially short-term, zero-interest loans that act like the health care world’s version of a payday loan. The amount they get is based on past Medicare reimbursements.
So far, Maine hospitals have accepted $580 million of these advances. Hospital finance officials fear their long-term impact – at best, repayment dulls the financial impact of returning patient volumes, and at worst, volume doesn’t rebound fast enough to pay the advance back before interest kicks in after a year – yet every hospital that can is taking them.
St. Joseph Hospital in Bangor has received $2.7 million in grants so far from the Provider Relief Fund, but that wasn’t enough to cover its losses at the height of the shutdown, when patient revenues were down 53 percent, so it had no choice but to tap into its future Medicare payments – about six months’ worth, or $15.4 million.
“It was about our cash flow, which is the problem most hospitals are facing right now,” said hospital president Mary Prybylo. “We won’t be getting a payment now even if our volume goes up, and it’s really going to have to go up to where it was before if we want to survive this. … But we have a responsibility to our community, at this time more than ever.”
Net patient revenue fell 53 percent during the pandemic, and is only now starting to creep back up, but it’s nowhere near the level needed to operate in the black, much less repay its Medicare advance, according to Mike Hendrix, St. Joe’s chief financial officer. That does not count the increased costs of COVID-19 prep and care, which clocked in at more than $700,000 in the first 90 days.
Only Calais and Penobscot Valley are not receiving any advances, but neither is eligible – both are mired in bankruptcy court. But that hasn’t stopped either one of these small hospitals from applying for another form of federal COVID-19 bailout assistance, the Paycheck Protection Program. The government tried to exclude them, but a judge is allowing both to participate.
Hospitals are taking other steps to close the revenue gap, including employee layoffs and furloughs in the midst of a public health crisis, reviewing community programs with an eye toward reducing those that are not considered essential to the community, and delaying some long-awaited building projects.
Houlton Regional Hospital has reduced pay to salaried employees, including doctors, by 2 to 10 percent, and hourly workers must take one furlough day a month to stay afloat during the height of the pandemic, a strategy that officials there say impacted close to 400 people.
Central Maine Medical Center in Lewiston implemented a voluntary furlough plan that allowed employees to maintain health care while applying for unemployment, redeployed the remaining staff to parts of the system that remained operational, and deferred executive compensation by 10 percent.
MaineHealth, the largest private employer in the state, has promised to protect its 23,000 jobs and current pay rates through the end of the fiscal year ending Sept. 30, said Katie Harris, the network’s senior vice president of government affairs. But it needs its patient volumes to return to pre-COVID levels or more bailout relief to keep staffing levels and wages safe beyond that.
“We worked together to flatten the curve of COVID-19 infections here in Maine and were able to avoid the worst of it, but it wasn’t without consequences,” Harris said. “With help from the federal government, we were able to smooth out our financial losses, too, but the losses haven’t gone away. … Without more help, something has to give.”
The network is likely to delay part of its planned $525 million, five-year expansion plan, Harris said. Ironically, the part that may get put on hold would be plans to fit out a wing of 32 new single-occupancy rooms – a hospital feature whose value is made clearly apparent during a pandemic, when hospitals are scrambling to isolate infected patients, Harris said.
While MaineHealth has the ability to absorb losses, many of Maine’s hospitals, especially its rural ones, were barely staying afloat before the pandemic hit, according to Michaud. Almost half – 17 out of 36 – of Maine hospitals finished last year with a negative operating margin. The average Maine hospital ended the year with a 1.4 percent operating margin.
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