Do hospitals need $100 billion bailout to get through coronavirus pandemic?

Steward Health Care, which owns Easton Hospital, is one of many hospitals across the country clamoring for government assistance to get through the coronavirus pandemic.

On Friday, hospitals across the country got their wish -- $100 billion in federal assistance that they requested, part of the $2 trillion relief package President Donald Trump signed Friday. However, it’s unclear how government officials will ensure funding will go directly to the hospitals that truly need it and will be used strictly in the fight against COVID-19.

The American Hospital Association, along with other health organizations, argue that the cost of caring for coronavirus patients along with the revenue loss hospitals will incur by postponing elective surgeries to conserve resources, will hurt hospitals financially and force some to close.

While some industries, such as retailers, restaurants and hotels that have been forced to close, need government assistance to weather the severe economic impact of the pandemic, many hospitals likely will not need government assistance to get by, said Gerard Anderson, professor of health policy and management at Johns Hopkins University in Maryland.

“Anytime there’s a crisis, everybody has their hands out,” he said.

Coronavirus patients who need critical care likely will be transferred from rural and struggling hospitals, some of which were on the verge of closure before the pandemic, to large, well-equipped hospitals with intensive care units and ventilators, he said. Some of those larger hospitals have billions in reserves, he added.

Plus, hospitals will be paid by insurance and government programs, like Medicare, for the influx of patients that need monitoring and intensive care, he said. Lawmakers also increased Medicare payments for coronavirus patients by 20% as part of the relief legislation, which is significant, because elderly patients are at higher risk of costly hospitalizations.

In New York City, the epicenter of the outbreak in the United States, hospitals are overwhelmed, dealing with high coronavirus admissions and a serious lack of resources such as basic protective equipment for staff and enough ventilators for the most critically ill.

In the Lehigh Valley and many other places across the country, the surge hasn’t happened, yet. Hospitals are seeing lower patient volumes because people are under quarantine orders and elective surgeries and tests have been suspended, raising financial concerns.

There’s a huge disparity among hospitals when it comes to funding for unexpected expenses, said Stuart Fine, a health policy professor at Temple University in Philadelphia and the former president and CEO of Grandview Hospital in Bucks County.

“Some health systems have reserves enough to last hundreds of days, or even years,” he said. “Others have only enough in reserve to last days or weeks without having positive cash flows.”

Small rural hospitals won’t be able to withstand financial losses as well as large regional health systems, he said.

For example, Lehigh Valley Health Network’s fiscal 2019 financial statement provides a snapshot in time, showing the network could have operated then for 170 days from its savings account alone. Part of the financial uncertainty for hospitals is that there’s no clear timeline for how long the pandemic will last.

As recently as last year, LVHN and St. Luke’s University Health Network, both nonprofits, had hundreds of millions of dollars in cash, investments and reserves, according to financial documents. They also have significant debts from expanding the networks by acquiring hospitals and building facilities. As of 2018, Steward, a for-profit system, similarly had significant cash as well as debt.

Steward has seen its expenses outpace revenues as it has acquired new, struggling hospitals in the past few years.

In 2018, Steward closed Northside Regional Medical Center in Youngstown, Ohio, striking fear that Easton Hospital would suffer the same fate.

The network lost $321 million more than it made in 2017, followed by a $269 million operating loss in 2018, according to an annual report of an affiliated company, Medical Properties Trust.

In a letter to Gov. Tom Wolf last Sunday, Steward and St. Luke’s, which was poised to buy Easton Hospital, said Easton lost $5 million in February and that the situation had worsened as profitable elective surgeries were postponed to conserve resources for coronavirus patients. The letter went on to request $40 million from the state to keep the hospital open during the pandemic.

The request didn’t sit well with some. “This is extortion at a time of need," one Morning Call reader wrote on social media in reaction to the story. That sentiment was echoed by dozens of others.

Instead of funding hospitals, government should help small businesses and nursing homes that are on the verge of closure, Anderson said.

“That’s who I’m most worried about,” he said. “The nonprofit nursing homes going under. They’re going to have to ramp up staffing, pay premiums with no additional money.”

But so far, there’s no announcement that government funding will be allocated to nursing homes.

“Hospitals are big very powerful, political organizations, nursing homes are not,” he said.

On Friday, Steward announced that Pennsylvania had granted not its full request but agreed to provide $8 million so that Easton Hospital could remain open for four weeks. After that, a company spokesman said, the decision to remain open would be made month by month.

Morning Call reporter Binghui Huang can be reached at 610-820-6745 and Bhuang@mcall.com.

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