Southeast Texas hospitals fared better than expected; planning and preparedness paid off and reduced damages.


Sept. 8—Texas not-for-profit hospitals hit by Hurricane Harvey will feel the credit impact of the epic storm over several years, a new report from Moody’s Investors Service found.

“The severity will depend on the magnitude of property loss, the amount and timing of insurance recovery and the availability of Federal Emergency Management Agency (FEMA) funds,” the authors said in the Aug. 31 report (subscription required).

“For hospitals, patient volumes will also be a key credit factor,” the report said.

Moody’s wrote that hospitals will absorb additional costs of recovery, which will negatively impact operating performance in FY18.

Earlier hospital preparations left many “relatively well prepared to weather the impact of the hurricane,” Moody’s reported. “It is likely that hospitals in Dallas, San Antonio and other regional centers will see an uptick in volume from population dislocations.”

Credit Impacts 

Dan Steingart, vice president and senior analyst for Moody’s, said a few days of lost activity can be damaging to hospital financial positions, depending on when a disaster strikes during a hospital’s fiscal year.

“The hospital can recover and patients will come back if the storm hits early in the fiscal year. But a big storm or flooding causing a few days or a week of downtime late in the fiscal year can have a fairly material impact,” Steingart said in an interview.

Steingart said Moody’s will request flood damage assessments and review hospital financial recovery plans before their next credit rating.

“We’ll be looking at whether the damages can be funded with the hospital’s own resources and how they manage this hiccup,” he said.

Lance Lunsford, vice president of the Texas Hospital Association (THA), said statewide hospital damage assessments are not yet available.

Lunsford said several hospitals took flood damage. Some went offline and transferred patients, while others remained open throughout the storm and some moved some acute services out to other facilities, but continued operating.

THA is helping members navigate the FEMA disaster relief process, he said.

“We’re working with state and federal government authorities on a series of waivers to speed reimbursement,” Lunsford said in an interview. “We will continue to work with carriers to deal with regulatory issues and prompt payment assistance. Our finance teams are paying close attention to reimbursement timeliness, coverage, and revenue cycle management issues.”

Darrell Pile, CEO of the Southeast Texas Regional Advisory Council (SETRAC), said his organization’s focus on disaster preparedness and response paid off.  

“Our providers endured the worst natural disaster on record, yet we did not incur significant repair costs nor downtime. Most importantly, care was continuously provided without loss of life,” said Pile.

He said some hospitals were battered by more than 40 inches of rain and became islands surrounded by lakes inaccessible to ambulances, staff or patients.

 “And yet this week, 95 percent of them are operational. A few did close down and evacuate, but of the 27 that closed, all but one are up and running,” Pile said in an interview.

Pile said hospitals prepared staff, stocked extra inventories of supplies, and invested in hardening their facilities. He pointed out that after Hurricane Allison in 2001, Texas Medical Center hospitals and medical schools installed “submarine doors” to prevent waters coursing through the inter-connected underground tunnels from flooding the hospitals.

SETRAC helped create and operates the Catastrophic Medical Operations Center (CMOC), which is embedded with the Houston Emergency Center and includes key leaders from fire, police, airports, public health, FBI, and EMS.

“We have a team of 12-14 seated in a room and get input from all hospitals and nursing homes,” he said. “It’s a complex operation that worked very well.”

Hospitals’ Experience

Nikki Martin, executive vice president of finance for the Southeast Texas Region of CHRISTUS Health in Beaumont, said her division’s four hospitals remained open throughout the storm and are now offering full services.

“We never shut down our emergency room and worked through the hurricane,” Martin said in an interview.

Martin said she knew from past hurricanes that some patients won’t have the “discretionary cash to pay their hospital bills as rapidly as we’d hope. They’re rebuilding their homes and lives. We are now in the process of assessing damages, from an expense standpoint to delayed revenues. We will apply to FEMA for what’s out there pertaining to our situation.”

Kevin Burns, CFO of Houston Methodist Hospital, said the city received nearly 50 inches of rain over a three-day period.

“But all eight of our campuses remained open during the storm,” Burns said. “Thankfully, the damage was relatively modest and we came out very well from a physical plant perspective compared to some other Texas hospitals.”

Burns said that Houston Methodist sustained several million dollars in damage to a $700 million patient tower under construction, a project that is covered by insurance.

Burns said physician visits have returned to normal faster than expected.

“I expected there could be some service drop-off as people deal with home and car insurance first. But we’re already seeing surgical volume responding very quickly,” he said. “We’re also responding to our staff’s needs. Many employees have lost their homes or had severe flooding or lost cars. After all the water recedes we’ll see if we have any claims to make and assess any long-term business interruption costs.”

A spokesman for the Louisiana Hospital Association said it is unaware of any severe flood damage to its member hospitals.

While Louisiana hospitals faced high rains and flooding, they also sheltered Texas evacuees and treated many Texans fleeing the storm.

“We are assisting our member hospitals who may face difficulty getting paid for treatment for patients from others states and we will assist them with that,” he said.

Donald Lloyd, president and CEO of CHRISTUS Health Southwest Louisiana in Lake Charles, said his system suffered relatively minor damage.

“We experienced only minor water intrusion in a few outpatient facilities and a direct hit from a lightning strike at our main hospital campus that burned up some motors,” Lloyd said in an interview. “It was materially insignificant compared to what hospitals in Port Arthur, Houston, and Beaumont faced.”

Lloyd said some insurers in Texas and Louisiana closed during the storm and could not perform pre-authorizations for treatment CHRISTUS provided.

“That’s been a little problematic for us taking care of patients transferred to our hospital from 100 miles away,” he said. “There clearly has been financial impact, mostly through lost revenues. But we’re also seeing a surge of patients here in Southwest Louisiana. Many doctors have appreciated that we’ve stayed open and we’ve seen some migration of procedures. We’re treating some MD Anderson oncology patients and coordinating care with their doctors in Texas.”

The Centers for Medicare & Medicaid Services (CMS) granted waivers from compliance with certain Medicare quality reporting and value-based purchasing program requirements to acute care and other hospitals and health facilities in areas impacted by Hurricane Harvey. Providers located in the 32 Texas counties and five Louisiana parishes that FEMA designated as disaster areas are granted exemptions without submitting requests.


Mark Taylor is a freelance writer based in Chicago. 

Publication Date: Friday, September 08, 2017