The first thing Matthew Streeter does when he gets to his office is to wash his hands. The CFO at Black River Memorial Hospital, Black River Falls, Wisconsin, then checks the supply inventory updates in his email and logs in for a remote conference with the incident command team. This is the new normal in the age of the new coronavirus.
The critical access facility has seen only one coronavirus patient so far, but like rural hospitals everywhere, Black River has spent the past several weeks preparing for a patient surge while also planning how to stay afloat financially.
Streeter says his hospital’s financial viability is good, with about 270 days of cash on hand, but that cushion may be in jeopardy. In the first week after activation of the disaster response plan, revenue dropped $1 million — 1% of annual revenue — as the hospital cancelled elective surgeries and outpatient services, while expenses for coronavirus-related supplies and preparation climbed.
Rural hospital status prior to the pandemic
Most providers are likely to take a financial hit from the pandemic, but rural hospitals are especially vulnerable. Since 2010, 128 rural hospitals have closed and 47% of those remaining are operating at a financial loss, says Alan Morgan, CEO of the National Rural Health Association (NRHA).
“This is the worst possible time for rural hospitals to have to be cutting into revenue,” Morgan said.
At Streeter’s operation, continuing declines in revenue and an anticipated spike in labor costs suggest a poor second quarter for his facility. The hospital may try to secure an emergency line of credit or leverage flexibilities available through the CARES Act to obtain an extension on a $2 million cost report payment to CMS due May 31.
“If we see a massive switch from outpatient to inpatient volumes, that will drive our Medicare reimbursement up significantly,” he said.
Henry County Health Center in Mt. Pleasant, Iowa, saw its revenue drop 40% as COVID-19 preparations progressed. CFO Dave Muhs says the critical access hospital is also hoping to secure an upward adjustment in its interim Medicare reimbursement rate as it cares for COVID-19 patients.
“We’ve got some cash on hand so we can weather this for the short term,” he said, though the situation could become tougher in two months. “The pandemic hasn’t hit rural America yet, but it could overwhelm us pretty quickly if it does.”
The expansion of the Medicare accelerated payment program, which is included in the CARES Act for hospitals experiencing “significant cash flow problems” resulting from “unusual circumstances,” slows losses for the next three to four months for rural hospitals, Morgan said, but “these are advance payments. As of now, rural facilities have to pay these back. The payments deal with the immediate cash crunch, but rural facilities will incur additional costs.”
Still unknown is how CARES Act funding will be apportioned to rural hospitals, he says. NRHA had advocated for 20% of the stimulus package’s hospital funds to be set aside for rural providers.
That support is much needed. Morgan said: “The large systems have tremendous staff resources to apply for that funding, but rural facilities do not, so they’re going to be slower to apply. Over the remainder of 2020 into 2021, how do we make sure that we don’t lose access points in rural areas because of this crisis?”
Morgan advises hospitals:
- To apply for the advance payments as soon as possible to make sure they have the cashflow to meet payroll and keep the doors open
- To stay updated on how to access the CARES Act funds that will help address shortfalls as a result of coronavirus
Tips for navigating short-term financial pain
Kathy Whitmire, CEO of Transformation Health Partners, LLC, in Toccoa, Georgia, says she has three tips for navigating the short-term financial pain:
- Keep a close eye on expenses. Ensure you are maintaining cash to cover the essentials of payroll and supplies.
- Consider offering a discount program to patients on balances due to accelerate cash flow. “It may seem controversial because people are out of work, but accelerating cashflow through discount programs is a great thing to do in the community when people don’t have money to pay a bill in full,” Whitmire said.
- Ask vendors for some flexibility. “Preserving cash is vitally important to allow hospitals to continue caring for COVID-19 patients,” she said.