$50 Million Proposal For Hospitals Falls Short of Industry Wishes
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State leaders are considering a proposal to give rural Oregon hospitals a $50 million line of credit to stay in business during the pandemic.
That will not go very far. The hospital industry said a month ago they needed four times as much -- $200 million -- to stay afloat after the state halted elective surgeries to preserve personal protective equipment during the pandemic. The Legislature’s Joint Emergency Board is expected to vote Thursday on the proposal, which would allow 24 critical access hospitals in rural areas to apply for loans. The money would come from the CARES Act -- the federal Coronavirus Aid, Relief, and Economic Security Act. The federal government granted Oregon $2.45 billion under CARES to compensate local and state government agencies, housing and transportation programs, childcare, airports and other sectors for coronavirus-linked expenses. Gov Kate Brown’s office is playing an instrumental role in allocating the money.
The Oregon Business Development Department would oversee the loans and hospitals could use the money to cover payroll costs. Under the proposal, hospitals would not be required to repay the loans until after they return to normal operations.
Oregon hospitals, especially in rural areas, are struggling to survive amid the pandemic. continues. They’ve suffered declining revenues with the ban on profitable elective procedures, losing millions of dollars a week, records obtained by The Lund Report show. Hospitals faced $200 million in operating losses in March, according to estimates the Oregon Association of Hospitals and Health Systems shared with lawmakers on Tuesday.
“As this crisis unfolded, Oregon’s rural hospitals answered the call to prepare for a surge of patients,” David Northfield, a spokesman for the hospital association, said in a statement. “They made beds available and paused the elective procedures that generate much of their operating revenue. The result has been a statewide loss of $200 million in March alone and a loss of $13 million every day in the month of April, which is why OAHHS asked the state for a $200 million lifeline.”
Overall, hospitals have faced a 41% reduction in inpatient revenue. In rural areas, hospitals have seen a 73% reduction, according to a hospital association presentation.
Payroll and benefits account for about half of hospital expenses. Hospitals have furloughed staff and laid off people. The hospital industry will shed the equivalent of 1,094 full-time employees by the end of this month. That’s about 2.6% of full-time employees in the industry.
Meanwhile, costs are increasing. Oregon hospitals estimate they spent $24 million in connection with COVID-19, including on tests, ventilators and personal protective equipment.
The CARES Act also granted $291 million to 3,500 medical providers in Oregon, including hospitals, clinics and doctors. However, the hospital association says a quirk in the law short-changes hospitals because the funding is distributed based on Medicare reimbursements for services which tend to be less than payments from Medicare Advantage plans. That puts the state at a disadvantage because 45% of Medicare beneficiaries are enrolled in a Medicare Advantage plan, the hospital association said.
Lawmakers heard from hospital executives on Tuesday, including Jenn Welander, chief financial officer of St. Charles Health System, which has 4,500 employees and four hospitals in central Oregon.
Welander told lawmakers that revenues are down 45%, and St. Charles estimates a $35 million operating loss for March and April, according to legislative staff notes obtained by The Lund Report. St. Charles received $13.6 million from the CARES Act, the equivalent of only six days of operating costs.
Welander confirmed those details. In a statement, Welander said the proposal will not provide the relief providers need.
“We appreciate the state’s efforts to provide additional support to rural hospitals,” Welander said. “But the current proposal is a loan program limited to only certain hospitals and doesn’t include all rural hospitals. Although potentially helpful for short-term critical cash flow needs for some, the structure as a loan and amount being tied only to payroll costs are not likely to provide meaningful relief to providers in the face of the significant reduction in volumes.”
Welander said hospitals need grants and other forgivable sources of funding for stability.
Some hospitals are in worse shape than others. Four unnamed hospitals will not have enough cash on hand to cover 30 days of operating expenses by the end of April, according to the presentation. Six other hospitals will have less than 60 days of expenses at the end of the month. Thirteen hospitals will have enough money to cover less than 90 days of expenses.
State leaders are banking on more federal funding to fill the gap.
“The speaker believes it is a good place to start since hospitals will receive more federal dollars over time,” said Danny Moran, a spokesman for Speaker Tina Kotek, D-Portland, in an email.
Brown has appealed to Congress for more help, sending a letter on Monday that asked for more funding for COVID-19, including for hospitals. Her letter didn’t give a dollar amount, but Brown warned that some hospitals in Oregon would close without help.
“Our rural hospitals in particular are struggling greatly, and if they close, they are unlikely to reopen again,” Brown wrote in the letter. “This will only exacerbate health disparities in our rural communities.”
The letter sought “additional targeted relief” so hospitals can stay open.
Liz Merah, a spokeswoman for Brown, said the governor’s office will work with the delegation and health care providers to determine the specific amount. Merah said the $50 million loan proposal is a “good step in the right direction.”
“The funding will provide a bridge until they begin realizing revenue as we begin to lift restrictions on them through the Governor’s framework for reopening Oregon,” Merah said. “Given the ongoing impacts to Oregon’s health care providers, the governor will continue to look for other federal and state-level solutions.”