Facing huge losses, Einstein plans furloughs and puts out a plea for fair funding
Federal aid to hospitals is not based on how hard they’ve been hit by the coronavirus pandemic. Einstein CEO Barry Freedman would like to change that.
Einstein Healthcare Network is on track to lose $70 million from March through June as it contends with the extra costs from caring for COVID-19 patients, and the loss of revenue from canceled elective procedures, chief executive Barry Freedman said Wednesday.
A surge in federal funding for health-care providers will help, but it won’t be enough, he said during a conference call with U.S. Sen. Bob Casey and U.S. Rep. Mary Gay Scanlon, two Democrats who criticized the Trump administration for distributing $30 billion in grants to hospitals without regard to how hard they’ve been hit by the coronavirus pandemic.
Einstein’s slice of the $30 billion in grants was $16.8 million. Plus, Einstein received $73.9 million in Medicare advances that must be repaid, a spokesperson said. Even if Einstein gets a bigger allotment in the next round of funding, Freeman said, it will not be enough to cover the nonprofit system’s losses.
“That’s one of the reasons institutions like Einstein and others have to look at policies like furlough,” Freedman said. “I do expect it. It’s one of the last things we want to do. It is not obviously the front-line people, but it will impact those areas that have closed or partially reduced in volume.”
He said more details would be available “in the next couple days.” Einstein, which is anchored by Einstein Medical Center Philadelphia in North Philadelphia and Einstein Medical Center Montgomery in East Norriton, has about 1,000 inpatient beds and employs more than 8,000. In Southeastern Pennsylvania, Einstein ranks behind the University of Pennsylvania Health System, Jefferson Health, Main Line Health, and Temple in revenue. The Federal Trade Commission and Pennsylvania’s attorney general are trying to block its long-pending merger with Jefferson.
WHYY reported the furlough plan Tuesday.
Troubles like those at Einstein are roiling the entire health-care industry, as hospital beds sit unused because care that doesn’t need to happen right away is being postponed. Expenses for treating COVID-19 patients also have soared. Pennsylvania Secretary of Health Rachel Levine said recently that statewide, 60% of intensive care unit beds and 55% of all hospital beds were empty.
Kevin Holloran, a senior director at Fitch Ratings and an expert in municipal bonds issued by health systems, said he is most concerned about financial deterioration at smaller, single-site health systems that lack solid cash reserves, naming Holy Redeemer Health System as an example in the Philadelphia region.
Generally, larger systems with multiple hospitals are better equipped to deal with the pandemic, he said. “If you get hit, it might take a lot of cash out of your balance sheet. It might impact your operations, but you have a huge cushion to deal with it.”
Holloran said he’s hearing that health systems are contending with 25% to 40% declines in revenue, compared with what would be happening without the extraordinary shelter-in-place measures designed to contain the spread of the disease. The percentage loss depends on the mix of businesses a system has, he said.
The Inquirer on Wednesday asked 16 Philadelphia-area health systems how much revenue they were losing because of COVID-19, and eight provided at least some detail, though not always on a comparable basis. For example, it’s not always clear whether providers are netting out reduced expenses for care not being provided.
Einstein said it is losing about $1 million a day in revenue and projects total revenue loss through June of $105 million, a roughly 30% reduction compared with last year. That will be partially offset by about $35 million in reduced expenses attributable to the forgone care. Einstein had $1.2 billion in patient revenue last year.
Jefferson Health is projecting a revenue impact as high as $120 million a month, before accounting for relief packages that have been approved or are pending. That is a monthly drop of roughly 33% compared with last year, when the system had $4.4 billion in revenue.
Main Line Health estimated that in the last two weeks of March, its revenue was $25 million less than it would have been without steps taken to control COVID-19. That works out to a 38% loss compared with those two weeks a year ago, based on 2019 revenue of $1.7 billion.
At Trinity Health Mid-Atlantic, which already announced an unspecified number of furloughs, executives said the COVID-19 crisis would reduce revenue by $32 million a month at the Mercy Fitzgerald and Mercy Philadelphia Campuses of Mercy Catholic Medical Center, Nazareth Hospital, St. Mary Medical Center, and Saint Francis Healthcare. That works out to a 22% drop based on last year’s revenue of $1.7 billion for the group.
Temple University Health System did not provide a figure for its revenue decline but said its monthly operating income was taking a $40 million hit, which is huge, considering that the North Philadelphia health system had just $37.7 million in operating income in the 12 months ended June 30 Temple had $1.9 billion in net patient revenue that year.
Doylestown Health said it had $6.4 million in revenue losses in the last two weeks of March, compared with 2019, and executives expect the losses to continue until it is able to resume normal operations.
In New Jersey, AtlantiCare, which has two hospital campuses in Atlantic County, experienced roughly a $13 million drop in revenue over the last two weeks of March. It was not possible to compare that to last year because AtlantiCare’s revenue is consolidated with its parent. AtlantiCare said operating room cases plummeted 74 percent.
Virtua, the largest health system by revenue in Philadelphia’s South Jersey suburbs, did not say how much revenue it lost, but said it received $28.5 million of the $30 billion in CARES Act grants awarded last week.
The financial pain for health systems is brutal right now, but it’s too soon to know the long-term financial impact of the coronavirus, said Dan Grauman, chief executive of Veralon, a Philadelphia health-care consulting firm.
“There’s going to be a lot of pent-up demand here,” he said. “Those patients that are just not seeing their doctors, not going to the hospitals, not having surgeries that they need to have, whether it’s a joint replacement or a valve replacement or any number of things that you can put off a bit. It’s not like they are going away.”