Loss of Operating Income Due to Decreased Patient & Procedure Volume Insurmountable
HILLSDALE, Mich.—Due to significant loss in patient volumes and revenue in the early stages of the COVID-19 outbreak in the United States, Hillsdale Hospital has been forced to reduce its staff through retirements and layoffs, both voluntary and involuntary.
“Independent rural hospitals like us provide the most patient-centered, community-focused care in the healthcare industry,” JJ Hodshire said. (Hodshire is chief operating officer and will become CEO as of June 1.) “This is where we live, work and raise our families. We are committed to providing the care our community desperately needs.”
Before Hillsdale County had any confirmed cases of COVID-19, the hospital saw such a sharp decline in volumes due to cancellations by concerned patients that the resulting decrease in revenue was projected to add a $6 million loss to the hospital’s bottom line by the end of its fiscal year ending June 30.
“Unfortunately, much of rural America has an aging, impoverished population. The vast majority of our patients rely on Medicare and Medicaid to pay for their care,” Hodshire said. “The current structure of Medicare and Medicaid payments by the state and federal government leaves us fighting for a zero percent operating margin. So, when our volumes decrease by half in some departments overnight due to a crisis like this, we’re left to make tough decisions that have a significant impact on our Hillsdale Hospital family.”
Due to the executive order from the governor of Michigan prohibiting elective procedures, Hillsdale Hospital had to make adjustments, as the circumstances would get significantly worse before they became marginally better.
“By prohibiting entry of anyone exhibiting symptoms of respiratory illness, while restricting access of almost anyone who isn’t themselves a patient, we have mitigated the risk of exposure to our patients who still need important healthcare services,” Hodshire said. “Elective procedures are not un-necessary—they are often pre-emptive measures to help patients avoid more serious health conditions in the future. Putting these off indefinitely could very well lead to serious health complications for our patients in the future.”
The lost revenue from these high-margin surgeries, imaging and testing services will have an even more severe economic impact than the lost revenue from other services.
“While we are actively preparing for COVID-19, we have continued to take care of our community,” Hodshire said. “Unfortunately, without decisive action, the circumstances of this pandemic could jeopardize the long-term viability of our organization (the third-largest employer in our county) and therefore the long-term health of our residents and our economy.”
In order to preserve financial stability through the anticipated months-long outbreak, the hospital immediately ceased capital equipment purchases, wage adjustments and hiring for new or open positions. The process of reallocating existing staff began, along with prohibiting overtime hours and use of casual or as-needed staff. The hospital also implemented hour-by-hour monitoring of staffing levels compared to census (the number of patients currently receiving care). To enhance this process, a daily staffing and census task force meeting was created to review current levels and ensure adequate adjustments.
“We are hopeful that the emergency relief funding we keep hearing about will make its way to us,” Hodshire said. “But payment for treating COVID-19 patients will not make up for the loss of revenue from caring for our normal patient population—people who desperately need access to health care.”
Hodshire also emphasized that this is not just a rural healthcare problem—the entirety of American healthcare is in jeopardy. Even though their operating margins are higher than zero, larger hospital and healthcare systems’ margins are still significantly lower than the projected losses looming as a result of COVID-19.
“Without immediate funding to offset the revenue implosion of hospitals across our state and our nation, the American healthcare system will collapse right when we need it to adapt and perform like never before,” Hodshire said.
Despite the drastic measures taken to reduce expenses, they are not sufficient to curb the projected operating loss. Hospital leadership has been forced to make the last-resort decision to layoff nearly ten percent of its current workforce. After notifying those employees impacted by this decision, a representative from human resources provided information regarding steps the hospital was taking to support the employees financial stability during this temporary layoff, including use of their paid time off, extension of their health insurance coverage and paperwork regarding unemployment and underemployment for those who qualify.
“One of the things we hear most often from our team members is that they love working here because it feels like they’re with family,” Hodshire said. “And we are. We work alongside our family, friends and neighbors as we care for our family, friends and neighbors, so this decision hurts. It’s painful and it’s personal for all of us.”
The layoffs are for an initial 45-day period and are not intended to be permanent. At the end of this period, operations will be re-evaluated to determine whether those affected can be brought back to work at that time.
“We sincerely hope this staffing adjustment will be temporary,” Hodshire said. “As we navigate the changing environment in which we care for our community, we will fight for the needed funding—from federal and state sources—to recover our substantial financial losses. We hope to recall every one of these employees as soon as we can.”