Those that cut labor costs early were more likely for-profit organizations. Other hospitals took no initial action on labor costs but finally decided to implement cuts, Blake said.
“Ultimately, they started to take action this summer, as they saw [revenue] really wasn’t coming back as much as they thought,” Blake said.
Hospitals most likely to cut positions, according to Kaufman Hall, were the smallest, with fewer than 26 beds. Such hospitals are more likely rural.
Labor cuts were most likely to have occurred at the 40% of financially vulnerable organizations, according to a Definitive Healthcare survey in May of 81 acute care organizations.
Acute care organizations that self-identified as financially at risk of closure laid off staff at nearly four times the rate of those not at risk, 38% versus 10%.
“Particularly for rural hospitals, who already struggled to attract and retain physicians and, generally, those rural areas contain older patients with higher rates of chronic conditions,” said Matthew Valley, a data analyst for Definitive Healthcare. “In that respect, COVID is making an already bad situation worse for those rural hospitals.”
By August, Definitive Healthcare, a healthcare data analytics firm, had identified 75 facility closures — most temporary — because of the pandemic’s financial toll.
The survey also found more than 80% of organizations repurposed staff to fulfill new obligations.
Another effort to retain staff
Edward-Elmhurst Health, an integrated health system in Illinois, also prioritized staff retention amid revenue declines as deep as 53% in April.
Instead of eliminating any of its 7,000 FTEs, the health system undertook a series of rolling labor policies, as the pandemic unfolded.
The state mandated the suspension of elective care in March, and Edward-Elmhurst continued to pay all staff through April, whether they were working or not. By May, the health system began to mandate PTO. If employees had no accrued PTO, they were allowed to borrow against future PTO.
The response aimed to, at least, match competitors, that were not undertaking mass layoffs.
“We didn’t want to lose people because we were doing more draconian measures than other systems were and then have employees leave and go to work for other employers and not be able to get them back,” said Denise Chamberlain, CFO for Edward-Elmhurst Health.
For June, July and August, the health system looked to its departments to focus on productivity targets, using both furloughs and PTO to achieve them due to reduced volumes.
Other labor responses included reducing the health system’s retirement matching payments, cutting the travel budget and postponing a decision on merit pay outlays scheduled for January. Additionally, departments were asked to consider whether they needed to fill vacant positions. Future labor cost changes could include restructuring its health insurance benefits.
The system also continued a pre-pandemic policy requiring all new positions that were not nursing or direct patient care to receive approval from a senior executive committee.
Another labor response was immediate formation of a health systemwide labor pool to bring nurses from closed physician offices to fill hospital needs for lower-acuity observation patients. Training was provided on the use of the electronic health record and inpatient care. Some inpatient hospital nurses also received ICU training.
The health system was too large to qualify for PPP loans, but it was bolstered by federal grants from the CARES Act.
It also is tracking eligible expenses, like testing sites, refrigerator trailers, excess PPE and labor pool training for possible FEMA grants.
Since the state’s reopening, most staff have returned to previous positions, and others retained new permanent positions, such as greeters at entrances to ensure infection control.
The health system planned ahead so when Illinois gave notice that the ban would lift on May 11, it was able to have surgeries scheduled that day beginning at 6:30 a.m.
Although patient volumes generally have returned to pre-pandemic levels, ED volumes and physician office use have been much slower to return.
A doubling of the health system’s share of revenue from uninsured and Medicaid patients from pre-pandemic levels has resulted in higher gross revenue than a year ago, but lower net revenues.
“That’s my bigger concern,” Chamberlain said. “I can get the patients back; I just don’t know if that will generate enough revenue to cover the higher costs of taking care of patients.”
For instance, PPE costs increased 500% during the early months of the pandemic and remain higher than normal, she said.
So far, the health system’s finances have been bolstered by bank loans, a de-risked investment portfolio, CARES grants and Medicare advanced payment loans.
“Right now, it’s all about cash,” Chamberlain says. “Making sure we have enough cash to survive.”
What the future holds
Although Edward-Elmhurst has cut its capital spending budget in half this year, as a cost-reduction move, future investments remain a priority. One potential future expansion is the launch of a hospital-at-home program, which could free inpatient capacity with a less labor-intensive option.
“We learned a lot from COVID about better ways to take care of patients without them having to be in the hospital, because nobody wanted to come,” Chamberlain said.
Also, Edward-Elmhurst is talking to health plans about taking on more risk-based contracts, shortening patient lengths of stay and garnering commensurate payments for moving patients to less-costly home-based settings.
“It’s about continuing to march forward maybe at a little more accelerated pace toward the healthcare of the future, which will have different care models and different payment models,” Chamberlain said.
The health system also is running various possible future financial scenarios, given the ongoing pandemic.