More than $8.3M in recently-received federal funds will help bridge the gap.
Stephens County Hospital has seen a significant drop in regular revenue streams due to the COVID-19 response, but says that recently-received fiscal help from federal COVID-19 aid funding will allow the hospital to meet all financial obligations, including any upcoming hospital bond payments.
“Our volume in surgeries and imaging diagnostics testing has gone down by about 85 precent and our ER volume has dropped by 50 percent, SCH CEO Mike Hester told ConnectLocal earlier in the week. “So in terms of the revenue impact of (COVID-19), it is massive.”
Hester said that hospitals across the country, especially smaller rural hospitals, are experiencing extensive, and potentially permanent financial hardships due to the COVID-19 pandemic.
“A lot of rural hospitals, if they didn't get this loan – some sort of lifeline from the government – there is a lot of concern. Rural hospitals don't have cash reserves and many of them are operating at a negative margin, as we are,” Hester said.
While Vice President Mike Pence, on March 18, called on hospitals nationwide to delay elective surgeries to free up capacity and resources for future coronavirus patients, Hester said the reduction in revenues come more from patient-driven decisions, not reductions in services offered by hospitals.
The hospital's decision to close entrances to the hospital except the emergency entrance in order to help monitor and control access and prevent virus transmission likely acerbated the safety concerns from residents and contributed to reduced non-Covid utilization of hospital services.
“People are so afraid to come to the hospital, even though they may be terrible health right now and need to come, they are scared to come,” Hester said. “I’ve heard these stories recently where people might have a little chest pain, a little indigestion, and they are saying 'I don't need to go the ER, it's probably safer for me to stay home.' Will those people end up having a massive blockage and heart attack? That is what I'm afraid of,” he added.
Although Hester said he hasn’t heard of a specific verified case of that situation happening in Stephens County, there is a significant amount of discussion among doctors and in the industry as a whole to indicate it is a problematic situation.
SCH also stopped scheduling orthopedic surgeries, as recommended by Pence.
“If we're not able to address the short-term cash needs of rural hospitals, we're going to see hundreds of rural hospitals close before this crisis ends," warned Alan Morgan, the head of the National Rural Health Association, which represents 21,000 health care providers and hospitals. "This is not hyperbole."
In the past decade, more than 120 rural hospitals across the country have shut their doors, due in large part to reductions in Medicare reimbursements, said Morgan. Those that remain open and operating rely on elective surgeries, physical therapy and lab tests – all consider high-margin activities – to maintain operations on a very narrow overall profit margin.
According to a report by Chartis Center for Rural Health, almost half of the rural hospitals in the country operate at a loss.
"This virus, and what it is causing for these hospitals, is the perfect storm that will close these hospitals at a time this country critically needs them," Robin Rau, CEO of Miller County Hospital in southwestern Georgia told MedScape magazine on April 21. "This is going to be the death blow to them."
Michael Purvis, CEO of Candler County Hospital in Metter, Georgia, reported to MedScape that the Candler County Hospital already fallen into a negative cash flow situation in the past week.
“The number of patients coming to his hospital, which is about 65 miles outside Savannah, for profitable outpatient procedures has dropped by half as people in droves have canceled their surgeries, MRIs and physical therapy,” MedScape commented in a recent article.
Given those comments, recent funding through several federal COVID-19 aid packages has been a welcome relief across the country and throughout the state as well as locally at SCH.
Stephens County Hospital received a $4,643,400 loan through the Small Business Administration Paycheck Protection Program, Hester said. The PPP, provided with the purpose of incentivizing employers to keep staff members on payroll during the COVID-19 Pandemic response, Although termed a “loan,” the funds are not subject to repayment as long as certain criteria are met.
According to the Treasury Department, the 1-percent fixed-rate PPP loans may be used for payroll costs, including employee benefits such as costs for parental, family, medical, or paid sick leave; Interest on mortgage obligations, incurred before February 15, rent, under lease agreements in force before February 15; and utilities for which service began before February 15. PPP guidelines state that “loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25 percent of that amount. That amount is subject to a $10 million cap.”
PPP loans will be forgiven, and not subject to repayment, as long as program stipulations are met.
“You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the eight weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25 percent of the forgiven amount may be for non-payroll costs,” states Treasury Department guidelines. “You will also owe money if you do not maintain your staff and payroll. Your loan forgiveness will be reduced if you decrease your full-time employee headcount. Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25 percent for any employee that made less than $100,000 annualized in 2019. You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.”
Among the certifications hospitals must sign in order to receive PPP loans, is a statement that the facility has not, and will not, receive another loan under the PPP program.
Stephens County Hospital will use a portion of the funds from the PPP to allow furloughed staff to use paid time off until there is sufficient volume of work to require their return to active duty, Hester explained.
SCH, in addition to the PPP forgivable loan, has received nearly $700,000 in stimulus funds from the U.S. Department of Health and Human Services (HHS) - $650,000 for the hospital and about $45,000 for the Physician Clinic. The stimulus funds, distributed based on previous-year Medicare reimbursement volumes, do not have to be paid back but must be used for COVID-related expenses.
“For us, that is the fact that our volume has dropped so much,” Hester said, explaining that making up for lost revenues due to that drop in volume would qualify as “COVID-related” expenses.
Through the CMS (Centers for Medicare & Medicaid Services) COVID-19 Accelerated Payment Program, SCH has also received an approximate $3 Million short-term loan.. These accelerated payments are the sole source of COVID-19 aid funding require repayment without exception.
The nature of that choice by citizens to avoid hospitals during this active COVID-19 period does present one positive aspect, Hester said.
“I think there will be a lot of surgeries that will be pending, so once we get past this, i think the volume will pick back up, but that will be probably eight weeks out if not nine or 10 weeks,” he said.
The Accelerated Payment Program “is a streamlined version of existing policy that allows Medicare Administrative Contractors (MACs) to issue no-interest short term loan payments in certain circumstances including national emergencies. The COVID-19 accelerated payments are no-interest short term loans if paid back in full before 210 days of receipt of the loan,” states CMS documentation. Procedures exist for extension of the timeline if the COVID emergency continues.
“What we are trying to do is just keep those (CMS Accelerated Payment Program funds) in a bank account and not used them as long as we don’t have to,” Hester said, adding that he hopes the hospital's volume of non-Covid revenue will pick back up soon.
Hester said the funds received from the various sources will help to level out fluctuation in the hospital’s financial situation brought on by COVID-19, and assured that required hospital bond payments will be met.