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COVID-19 puts rural hospitals in Eastern Washington on brink of financial collapse

Emergency Room Physician Aaron Petersen poses for a photo at Newport Health Center's COVID-19 triage unit on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review)

It sounds like an oxymoron: hospital loses money in the midst of a pandemic.

But that is happening across Eastern Washington: Rural hospital systems have bolstered COVID-19 responses and protections while losing major revenue streams from other kinds of care. The moves have left many in a financially precarious position.

Scott Graham, chief executive officer of Three Rivers Hospital in Brewster, called the Washington State Hospital Association a few weeks ago with a question he had never imagined posing: How do you close a hospital?

“When this crisis came along initially, I wasn’t thinking we would be hurt necessarily other than with the ramp-up costs, because I figured we would be getting patients,” Graham said. “But when social distancing went into effect and cancellation of elective surgery procedures happened, we saw all of the patient volume essentially cease.

“So with no revenue coming in, that was really difficult for us.”

“And we didn’t have any depth in terms of reserves to be able to fund what’s going on at the hospital for very long,” he said.

Three Rivers was not alone.

WSHA helped 14 hospitals access emergency funding from the state late last month.

For Graham, that meant about $210,000 in emergency and reserve funds for the Brewster hospital to stay afloat. In total about $2 million in state and Medicaid emergency funds went to 14 hospitals at the end of March.

Graham said Three Rivers Hospital had only a couple weeks’ worth of cash on hand at the time, so that support was crucial.

With the state’s support, federal aid and advanced Medicare loans, the critical access hospital will be able to stay afloat – for now. But the financial impact of COVID-19 on Washington state’s rural hospitals cannot be understated.

“This is unprecedented. There’s no way you could be financially prepared for this,” Jacqueline Barton True, vice president of rural health programs at the Washington State Hospital Association, said. “This sort of financial devastation is not something that we could have prepared for, and I have a lot of concerns about what happens if help doesn’t come soon enough.”

Some rural hospitals have received their first installment of funds from the federal CARES Act. Those payments are about $400,000 to $600,000 on average for smaller hospitals, according to WSHA.

Despite having a robust way for most rural hospitals to access community taxpayer support through the public hospital district model, rural hospitals in Eastern Washington are losing money on a daily basis as they balance pandemic preparations with canceled elective surgeries, primary care or patient therapy.

Medical Laboratory Scientist Brandi Fry tests a patient who asked that his name not be used for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review)
Medical Laboratory Scientist Brandi Fry tests a patient who asked that his name not be used for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review) Buy this photo

COVID-19’s financial impact for rural hospitals

Critical access hospitals by definition can only have 25 beds, and many hospitals in rural Eastern Washington have long been creative with how they provide care to their communities.

Many rural hospitals also have primary care clinics or nursing homes. Some offer surgeries or different types of therapy or rehabilitation settings; even if a person must go to a large hospital for surgery, they can recover at home.

But that model was disrupted on March 19 when Gov. Jay Inslee issued a proclamation prohibiting medical and dental procedures that would not harm the patient if delayed for three months.

While family planning, emergency care and vital surgeries were exempted from the order, Inslee’s order meant small, rural hospitals would be without their main sources of income until at least May 18, when the ban is set to end.

In the meantime, many hospitals, large and small, shifted gears to telemedicine and COVID-19 response.

Patients were encouraged to call their health care provider instead of going into the hospital or urgent care settings. Even small rural hospitals became nimble, setting up hotlines.

That helped preserve access to care for patients, but it also meant Eastern Washington clinics and rural hospitals sat relatively empty, and revenue streams began to dry up.

In Republic, Ferry County Health has a hospital as well as a clinic, long-term care and an assisted living facility. It has lost a lot of revenue due to a lack of imaging and lab work.

“Clinic visits are way down, and when they go, often labs and imaging are not ordered and that really is hurting us quite a bit,” Aaron Edwards, chief executive officer at Ferry County Memorial Hospital, said.

In Newport, where the hospital and health care system has a primary care clinic and a relatively new advanced care facility, outpatient numbers have dropped 30%. That decline occurred even as the hospital set up a drive-thru COVID-19 screening site that has collected 199 samples as of last week.

When nonessential surgeries stop or primary care visits stop, other services drop off, too.

“Surgery, imaging and therapy services are the three areas that were biggest hit as far as impact on staff and income-generating (services) for the hospital,” said Laurie Gronning, public information officer at Whitman Health and Hospital.

Administrators at Whitman decided to reduce hours for about 10% of their staff due to those impacts, Gronning said.

The way reimbursement and billing typically works between hospitals and insurance companies will also adversely affect hospitals in the midst of the pandemic.

At Lincoln Hospital, where 30% of patients are on Medicare, reimbursement and payment from insurance companies can take weeks to process. Lincoln Hospital also has primary care clinics that drive their revenue, Chief Financial Officer Tim O’Connell said.

“Our primary care volume is down 60 to 70%. That’s a huge driver of that” decrease in revenue, O’Connell said. “We’re projecting monthly losses with this reduction in revenue that would make us unsustainable.”

Beyond losing revenue from typical streams, hospitals are also using their own funds to test and prepare to treat people with COVID-19. Administrators at several rural hospitals in Eastern Washington said they are purchasing personal protective equipment on their own dime – if they can find it.

“The rurals have been super hard hit on the supply chain because there’s an international shortage,” Barton True, with WSHA, said. “When the actual orders do come in and you’re a supply company, you’re looking at the million-mask order from a giant system or a 15,000 mask order from the rural hospital.”

The rural hospitals lose out , forcing them to turn to local health districts or community businesses for supplies like masks.

Some rural hospitals are also paying for their own COVID-19 testing kits and materials.

In Ferry County, the hospital is paying for all the testing supplies and sending samples off to LabCorp or the Washington State Public Health Lab for processing. They are not charging residents for testing either.

“They’re still sorting out how the reimbursement will work for COVID-related expenses,” said Brant Truman, chief financial officer at Ferry County Memorial Hospital.

As a result, hospitals are having to eat all those costs for now.

To respond to the urgent need, the state hospital association did something it had never done before: procured supplies for several rural hospitals, including Ferry County Memorial. A handful of rural hospitals had a total of 300,000 masks delivered this week.

Medical Laboratory Scientist Brandi Fry dons PPE gear before testing a patient for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review)
Medical Laboratory Scientist Brandi Fry dons PPE gear before testing a patient for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review) Buy this photo

Loans and funds and grants, oh my

Federal funding is on its way to health care systems nationwide, but payments to rural hospitals will likely only account for a couple weeks’ worth of expenses, at best. Some administrators are more optimistic than others, although the reality is that even larger hospital systems are in need of the same type of funding.

Rural hospitals attached to larger systems, like St. Joseph’s Hospital in Chewelah and Mount Carmel Hospital in Colville, are relying on their ties to Providence St. Joseph Health Care to get some federal relief.

“Both hospitals are part of the Providence St. Joseph Health system and as a health system, we are pursuing Medicare Advantage payments to support our cash flow needs and are also applying for FEMA assistance,” a statement from a Providence spokeswoman said.

Both Stevens County hospitals are experiencing low patient censuses and the effects of the governor’s order while preparing to treat COVID-19 patients.

“While we are tracking the potential financial impact of the virus, it is too soon to know the long-term effects,” the statement said.

The CARES Act allots $100 billion for health care systems nationally. The first installment of that funding was $30 billion. In Washington, that amounted to about $553.8 million shared among 5,362 health care providers and systems statewide.

For rural hospitals, that means about $400,000 to $600,000 each, which could pay for about two weeks’ worth of operations at a small hospital in an optimistic scenario. Many hospitals received this funding late last week.

The CARES Act alone will not help stall longer-term financial effects.

In addition to the federal bailout funds, rural hospitals can also ask for Medicare advance payments. The catch, however, is that these are loans which will need to be paid back.

O’Connell, in Lincoln County, said that short-term reprieve is necessary to mitigate downstream impacts but noted loans still have to be repaid.

“Even if we say, ‘Everyone back to normal,’ it still won’t be back to normal for a few months,” he said. “So for us to resemble what we were before and move forward with plans we’ve had for years, there needs to be some form of grant funding available to us whether that be forgiveness of advances by Medicare or an update to legislation to allow rural public hospital districts to enroll in the SBA program.”

The Small Business Administration loan program has, so far, been unavailable to public hospital districts.

Several members of Congress, including Washington Republican representatives Dan Newhouse and Cathy McMorris Rodgers, signed a letter sent to U.S. Secretary of the Treasury Steven Mnuchin and the SBA administrator asking that the SBA clarify that rural hospitals and clinics can also apply for these loans.

“Rural hospitals and health care providers in Central Washington are struggling to keep their doors open. As Congress provides relief for small businesses, which serve as the backbone of our local economies, we must also provide relief for the hospitals and clinics that provide critical and lifesaving care for rural communities,” Newhouse said in a statement provided to The Spokesman-Review.

Sen. Patty Murray spoke with Eastern Washington hospital administrators this week about their financial woes, and she said she is working to get funding for rural hospitals into the next COVID-19 stimulus bill.

“Many of them were on the brink before this,” Murray said on a press call this week.

Hospital administrators told Murray the CARES Act funds would only get them through a few days, but would not sustain them for very long. Murray acknowledged that many rural hospitals are struggling to get personal protective equipment and other necessary supplies to keep the operations they are allowed to maintain running.

“They need to have (funding) in place to ramp up again. PPE, masks – those kinds of things we talk about so they can protect their staff and patients,” she said.

Barton True said the financial losses are felt across all health care systems but are particularly exacerbated in rural hospitals.

“They truly are the ones that are feeling it first, but it’s not limited to our rural hospitals,” she said.

Confluence Health, which operates two hospitals in Wenatchee and several clinics throughout Central Washington, is a nearby example.

Confluence announced this week it would have to implement pay cuts to staff, with executive and administrative positions taking the largest cuts due to the COVID-19 expenses they were incurring.

This comes as Confluence providers are treating COVID-19 patients from the region in one of their hospitals in Wenatchee. Central Washington Hospital, while not a critical access hospital, is treating 16 patients with suspected COVID-19, including 10 people on ventilators.

Medical Laboratory Scientist Brandi Fry removes PPE gear after esting a patient for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review)
Medical Laboratory Scientist Brandi Fry removes PPE gear after esting a patient for COVID-19 at a drive up testing facility on Monday, April 13, 2020, at Newport Health Center in Newport, Wash. (Tyler Tjomsland / The Spokesman-Review) Buy this photo

What’s at stake

The pandemic has led hospital leaders to furlough staff, sideline projects and watch their hard work keeping their systems in good financial health unravel in just a couple weeks’ time.

In Lincoln County, leaders had signed the contract to build a new primary care clinic in Davenport.

In Ferry County, hospital leaders had agreed to purchase the local pharmacy to keep it open.

In Newport, they had just opened a new advanced care facility this past fall.

In Pullman, hospital district leaders were re-grouping to figure out how to apply for a family medicine residency program with WSU after a tough loss at the ballot box.

Now these systems are just hoping to keep their doors open and avoid furloughs.

But furloughs are on the table as an option at several hospitals.

Pullman Regional Hospital implemented 25% pay cuts across the board for hourly and salaried staff for 60 days.

In Lincoln County, administrators had to send some employees in departments with low-census numbers home and use paid time off to make up the hours.

In Newport, administrators had to furlough 22 staff members in some departments with less volume, although most furloughs were voluntary and staff members are on call. Furloughed staff get to keep their health benefits.

Some hospitals are getting creative with medical teams that can’t work due to COVID-19 restrictions, including therapy and surgery teams.

In Republic, the doctor of the physical therapy unit and his team are delivering lunches to other health care workers. In Colfax, surgical nurses are answering the COVID-19 hotline. In Brewster, Graham just hired a new surgeon who is leading preparedness drills for COVID-19 and helping education efforts for other health care workers.

Ultimately, even for hospitals that started this spring in good financial shape, the near future does not look promising. Hospitals that had more than 100 days of cash on hand before the pandemic have watched their funds dry up as they continue to pay staff without performing the procedures that generate revenue.

And health care providers statewide have about a month to go before they can offer more than very limited medical services beyond COVID-19 and emergency health care, worrying administrators about what is to come.

“It feels like when this is over – and we don’t know when that will be – we might be back to square one,” said Truman, of Ferry County Memorial Hospital, noting that all the work the hospital and health care system did to pay off debts and get in better financial shape will be lost. “And what we did to get out of the poor financial condition was not easy, and this will be a whole new set of hurdles.”

An April 2020 report on the financial health of rural hospitals, which used data primarily from 2019, found that five essential rural hospitals in Washington State were at high financial risk of closing. Then COVID-19 came to the U.S.

So far, these challenges exist largely on a background of calm before the storm for many rural hospitals.

Eastern Washington has had coronavirus outbreaks in communities in Grant and Yakima counties as well as in the Tri-Cities and Walla Walla and in some long-term care facilities. If rural hospitals are struggling to stay open and then are needed to support their communities to take care of patients with COVID-19, these challenges could be compounded.

“In a pandemic every bed counts. You need to be able to move patients,” Barton True said. “Every bed will be crucial here, and losing capacity in the system – it really does have implications for our statewide capacity to respond appropriately to this pandemic.”

Arielle Dreher's reporting for The Spokesman-Review is primarily funded by the Smith-Barbieri Progressive Fund, with additional support from Report for America and members of the Spokane community. These stories can be republished by other organizations for free under a Creative Commons license. For more information on this, please contact our newspaper’s managing editor.