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COVID-19 deepens financial woes for rural hospitals

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Financial challenges faced by rural hospitals prior to the coronavirus pandemic have only been exacerbated over the past couple of months, as patient counts and revenue have sharply dropped, officials say.

Ozarks Community Hospital CEO Paul Taylor said the Gravette, Arkansas-based health care system has experienced a decrease of more than 60% over this time last year in emergency room volume and revenue since mid-March.

“We normally collect about $4 million a month this time of year systemwide,” Taylor said of revenue, noting elective surgeries have been stopped for weeks. “In April and May, I expect us to collect less than $2 million.”

OCH operates more than a dozen clinics in Missouri, Arkansas and Oklahoma, including Springfield, Marshfield and Sparta.

Only “a handful” of COVID-19 patients have been treated at the hospital, Taylor said. He acknowledged temporarily not providing other medical procedures – as recommended by Centers for Disease Control and Prevention and Centers for Medicare and Medicaid Services – has been a financial blow.

Needing assistance
Vital help has come from a federal coronavirus rescue package for health systems, he said. To date, OCH has received $1 million, and more is coming in another round of funding announced May 1.

“Without those funds, it’s highly probable we would have not made payroll,” Taylor said, adding he was uncertain of the federal sum as of press time.

Payroll is the health system’s largest monthly expense, at $3 million. OCH employs around 500 and none has been laid off, Taylor said. It was further helped by a $5 million Paycheck Protection Program loan.

Bolivar-based Citizens Memorial Hospital isn’t eligible for any PPP funds, as it exceeds the 500-employee maximum. However, CEO Gary Fulbright said the health care provider has been able to retain its roughly 2,000 employees systemwide through Coronavirus Aid, Relief and Economic Security Act funding.

CMH received $3.5 million in the first round of funding, and Fulbright expects another $5 million in the next round. The funding announced this month covers $296.2 million for 347 rural hospitals and health care providers in Missouri.

“It would have been very dire without the grant funding,” he said of the annual budget.

Even with the federal funds, Fulbright projects CMH will fall 5%-10% below the fiscal 2020 budget of roughly $459 million, equating to a drop of $23 million-$46 million.

Budgeting for fiscal 2021 is ongoing, he said, and will probably be at 90% of its normal expected volume.

“As probably anybody would admit, it’s a wild guess at this point, not knowing what’s going to happen with COVID,” Fulbright said of budgeting forecasts.

Money issues
Both OCH and CMH expect to resume elective surgeries and outpatient procedures soon. CMH announced May 4 it has lifted its temporary restrictions and is beginning to schedule services for patients who aren’t considered high risk.

OCH and CMH are two of 1,821 rural community hospitals in the United States, according to the American Hospital Association. In southwest Missouri, other rural hospitals are operated by CoxHealth in Branson, Lamar and Monett; by Mercy in Aurora, Carthage, Cassville, Joplin and Lebanon; and by Freeman Health System in Joplin and Neosho.

Brock Slabach, senior vice president of member services for the National Rural Health Association, said rural facilities are paying a high price to follow CDC and CMS recommendations for temporarily discontinuing nonessential care.

“As a result, they were hemorrhaging cash,” he said, adding the long-term damage of COVID-19 on rural health providers is unknown.

Money issues have long plagued rural health care providers, Slabach said. COVID-19 made personal protection equipment a major new cost issue and few rural hospitals have intensive care units or ventilators, meaning those patients go to urban health care facilities.

According to an analysis by consulting firm Guidehouse, more than 350 rural hospitals, or nearly 20% of the national total, are at high risk of closing due to financial difficulty. The five states most likely to be impacted by hospital closures are Alabama, Kansas, Mississippi, Oklahoma and Tennessee.

Research was conducted prior to COVID-19, but the analysis noted the pandemic is likely to worsen the overall situation.

“The fractures already there have simply been widened and become more pronounced,” Slabach said.

Rural health care providers also have received financial help from the CMS Medicare Accelerated and Advanced Payment Program. Nearly $34 billion in loans was distributed nationally to Medicare providers in early April, before the coronavirus relief bill funds were available. CMH received $13 million, while OCH was given $7 million.

Taylor said the issue with CMS loans is they require full repayment. Some providers have to pay them back as quickly as 120 days, while most, such as OCH and CMH, have up to a year. Any outstanding balance at the end of the repayment period will be subject to interest.

Fulbright said CMH’s plan for repaying the loan would be addressed in its budget plan.

“We can choose to delay that and pay interest on it, which is something we may need to consider,” he said.

Taylor is proposing a long-term amortization to pay back the loan. He recently wrote a letter to legislators, seeking a one-time expansion of the U.S. Department of Agriculture’s business and industry guaranteed loan program. Taylor suggested the program be modified for rural hospitals to allow for a 25-year amortization.

“Let us pay it back over a long period of time,” he said. “Don’t take it back all at once or in one to three years or something like that. It’s going to be too much money for us to pay back in that short amount of time.”

As financial issues continue for health care providers, Slabach said he expects another year of COVID-19 infections before a recovery phase is reached with a vaccine on the market.

“I don’t see this public health emergency ending anytime soon,” he said. “This will be a marathon and not a sprint, in terms of our response phase.”

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