Rural health CEO on the financial struggles of COVID-19

Gabriel Perna | April 24, 2020

The ongoing struggles of rural health care in America are not a secret to anyone in this industry.  

In 2019, a record 19 rural hospitals closed. Thus far in 2020, nine hospitals have already closed and the COVID-19 pandemic, with its devastating impact on hospital operating margins, threatens to make it a much more staggering amount.  

Financial resources dedicated to providers in the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act will help, rural health advocates say. The National Rural Health Association says that half of rural hospitals and providers operated at a financial loss before the pandemic. The loss of revenue from the pandemic meant hundreds were at risk of closure before the funding came in. 

But the funding from Congress hasn’t come without hiccups or concerns. There were complaints that the initial $30 billion to be distributed from HHS didn’t give enough to rural providers. HHS said the next round will be geared towards rural health providers, but America’s Essential Hospitals, a trade group for vulnerable health systems and hospitals, has concerns about how the agency targets its funding dollars.  

“Targeting will require complete and accurate data, and we have concerns about technical problems providers now face as they try to comply with the department’s request for targeting data. We call on the department to extend its data submission deadline until it has resolved these technical issues and clearly and publicly communicated how it will use this information,” stated Bruce Siegel, MD, President and CEO of America’s Essential Hospitals. The group also wants HHS to minimize the application process to streamline funding.  

Preparing for COVID-19 

Steve Barnett, CEO of McKenzie Health System, Sandusky, Mich., has been through transformative times before. He took over the job as CEO of McKenzie in 2008, right as the “Great Recession” was starting and a few years before the Affordable Care Act disrupted the entire industry.  

It’s no surprise that he has McKenzie ready for the impact that COVID-19 has had—and may continue to have—on the health system. While McKenzie hasn’t had any COVID-19 patients, employees have put all efforts in preparing for a potential surge of high-acuity care patients from the Detroit area, which is an hour-and-a-half away and is a COVID hotspot. It canceled elective surgeries over a month ago.  

“Early on, we created a COVID team internally that included our infection control nurse, my executive team, finance, operations, and the medical director for the ED and hospitalist group. We began meeting daily to determine a) What’s going on in our county, the state level and nationally and b) Evaluate our level of preparedness here, in terms of negative pressure rooms, protective equipment…how we’re going to process patients. It’s been an evolving number of lessons, protocols and process changes that have allowed us to become very well prepared for whatever might come through the door,” Barnett says.  

One positive development for McKenzie, like many health systems in America, is the increased use of telehealth solutions, especially to care for patients with chronic co-morbidities. Barnett is grateful for this because many of these patients were hesitant to get onboard with telehealth in the past and this has forced them to try it out.  

We may get some funding through these federal and state dollars that can get us through this period but if they’re not forgiven and we have to pay them back, we’re not going to have the revenue then to support the payback six months down the road.

Steve Barnett, CEO of McKenzie Health System

“It’s been a good thing in some ways because it’s ramped us forward,” he notes. 

A financially sticky situation  

One challenging element for McKenzie, and really for most hospitals, is that without elective surgeries, they don’t have enough revenue coming inAdd in the fact that the hospital must stay fully staffed in case there is a surge of patients, and it’s what Barnett calls a “lopsided equation.”  

The financial concerns of rural health providers during COVID-19 has drawn the attention of The Bipartisan Policy Center. The non-profit advocacy group recently released a report this week on the rural healthcare crisis, which included several recommendations to lawmakers to stabilize the economic situation of these hospitals for three years coming out of COVID-19.  

“This virus has no borders and shows how fragile the rural healthcare system really is in America…Coronavirus has caused significant financial pressure on rural hospitals, many have been forced to lay off or furlough employees,” said former Senate Majority Leader Tom Daschle, co-founder of the Bipartisan Policy Center (BPC), during a webinar announcing the report. 

McKenzie received money from the federal government’s first round of “provider relief” funding as well as some aid from the state. The system will also selectively start to bring back elective surgeries. Barnett knows McKenzie is not out of the woods and could be facing more trouble down the road, if it has to pay back the loan.  

“When we start adding this all up, this is just to get us through this period right now because our revenue has plummeted. The state and the nation are asking everybody to stay home and only go where you absolutely have to go,” Barnett says. “We may get some funding through these federal and state dollars that can get us through this period but if they’re not forgiven and we have to pay them back, we’re not going to have the revenue then to support the payback six months down the road.”  

Long-term impact 

Coming out of this, Barnett says that it’s imperative that the health care industry is better prepared for either the second wave of COVID-19 or future pandemics. It’s one thing to run through drills on a tabletop and it’s another to go through it live, he says. 

“You can’t overprepare. You can’t get far enough ahead of it,” Barnett says. “There’s a lot of work in how you adequately prepare for those conditions. How are you going to bring a patient into the organization? How many negative pressure rooms do you have? There are a lot of moving parts that you don’t begin to think about until you’re faced with the threat of that surge of patients.”  

About the Author

Gabriel Perna, Senior Manager, Digital Content

Gabriel Perna is the Senior Manager of Digital Content at Health Evolution. He brings 10+ years of experience in covering the intersection of health care and business. Previously, he was at Chief Executive, Physicians Practice and Healthcare Informatics. You can reach him via email or on Twitter at @GabrielSPerna