The latest round of $75 billion in federal stimulus funding will serve as a shot-in-the-arm for the nation’s not-for-profit hospitals, according to a national bond-rating agency.
However, Moody’s Investors Service cautioned Friday that “although the new funds will further curb some of the industry’s losses caused by the suspension of elective services and increased costs to fight the coronavirus, we do not believe it will fully compensate providers.”
“We still expect hospitals to suffer material losses and reductions in cash flow over the coming months,” said Dan Steingart, Moody’s senior credit officer.
Moody Financial Services projected March 20 that postponed elective surgeries “will likely reduce hospital revenue by 25% to 40% per month on average and strain cash flow significantly.”
Novant Health Inc. plans to resume on May 4 certain non-essential elective surgeries and procedures, as well as select in-person wellness appointments. Those appointments will include some pediatric well checks, chronic disease and acute issue visits.
Wake Forest Baptist Medical Center plans to resume similar services in early May.
Novant, Wake Forest Baptist and Cone Health temporarily halted those non-essential surgeries, procedures and appointments March 18 to preserve hospital beds for potential COVID-19 patients.
On March 25, S&P Global Ratings revised its sector outlook for what it called the U.S. not-for-profit acute health care sector to negative “due to the quickly evolving COVID-19 pandemic and the subsequent investment deterioration which could pressure credit quality.”
On Friday, the N.C. Hospital Association appealed to Democratic Gov. Roy Cooper and the Republican-controlled legislature to provide state-funded coronavirus relief funding. The advocacy group projected at least $3 billion in revenue losses for members by May 31.
“We are extremely concerned that nowhere in the governor’s budget does he mention providing financial support for hospitals, which have taken extraordinary measures to be there for every North Carolinian during this unparalleled public health emergency,” the NCHA said.
“They have done this while taking gut punches financially, collectively losing an estimated $1 billion per month from postponing nonessential services and procedures and spending huge sums to prepare for and respond to COVID-19, such as purchasing personal protective equipment and ventilators at excessive cost and installing telehealth capabilities.”
The NHCA mentioned that hospitals across the state have turned to furloughs and staff pay cuts, and to borrowing money.
Wake Forest Baptist Medical Center’s top executive informed employees Wednesday about furloughs for leadership and administrative employees that could begin this week or in early May.
Wake Forest Baptist has 19,220 employees overall. It is the largest employer in Forsyth County, with 14,271 workers as of October 2018. It owns and manages Davie, High Point and Wilkes medical centers.
Dr. Julie Ann Freischlag, the center’s chief executive and medical school dean, said the furlough period would last 16 weeks. It is not clear how many furlough days or weeks employees will be required to take.
Freischlag said preparation and planning for COVID-19 “has resulted in significantly lower patient volumes in several services and less revenue for our entire health care system, resulting in a net economic gap of tens of millions of dollars per month.”
“Funding from the (federal) CARES Act in the past month is expected to cover only 10% to 20% of the losses we are facing,” she wrote.
Wake Forest Baptist said “most employees in our health system will be participating in (changing) time or pay in some fashion.”
Meanwhile, Novant entered April 8 into a line of credit worth up to $950 million with five banks.
Novant said in a statement that it “anticipated a decline in revenue as a result of COVID-19. Establishing expanded lines of credit is appropriate business planning in that anticipation ... ensuring our operations are safeguarded by additional funds if circumstances warrant.”
The NCHA said that federal funds “have been nowhere close to sufficient to close the gap.”
“We are thankful, however, for the bipartisan N.C. House COVID-19 Committee on Health taking action on Thursday to pass an appropriations and policy bill that we fully support.”
A state legislative COVID-19 group recommended Thursday approval of a draft bill that would appropriate $480 million in federal funding toward state health-care initiatives.
The bill is expected to be taken up this week by the House as one of its first actions in the 2020 session, which begins Tuesday.
In most instances, the funding would become available when the bill is signed into law. The majority of the funding is in the $25 million range.
The biggest of 15 funding streams provides $100 million toward a COVID-19 Response Research Fund, to be divvied up evenly between the state’s four medical schools — Wake Forest, Duke, East Carolina and UNC Chapel Hill.
“It is time to help restore solid financial footing for the one industry that has the moral and legal imperative to continue to care for all North Carolinians,” NCHA said.
“We now call on the General Assembly to correct the governor’s omission.”