When the COVID-19 pandemic hit Colorado, the state’s hospitals were faced with what the Colorado Hospital Association’s Julie Lonborg called a “perfect storm.”
To prepare for the wave of patients — which could overwhelm hospital staff and resources, as it has in states like Florida, Texas and New York — Colorado hospitals had to spend additional money on personal protective equipment, testing supplies and additional staff, but also faced an immediate drop in income.
“Hospitals when COVID happened had almost an overnight loss in revenue as they had an almost overnight loss in patients,” said Lonborg, CHA’s vice president of communications and media relations.
“So there was a loss of revenue, a loss of patients, an increase in expenses, and huge pressure on the supply chain. So that resulted in hospitals having to pay more for things that they knew they were going to need in order to care for patients.”
Things were so dire for Colorado hospitals that the CHA initially projected the health care facilities would lose $4.1 billion in revenue this year.
More recently, as state orders prohibiting elective surgeries expired and more Coloradans were willing to schedule preventive care, those projections have become more favorable. CHA doesn’t have new estimates yet, but Lonborg said revenue declines will likely be less than originally anticipated.
However, Colorado hospitals are still losing money and will likely continue to for the foreseeable future.
With hospital finances across the country so heavily strained, rumors emerged early on in the pandemic that with hospitals receiving more funds for treating COVID-19 patients than those with other medical needs, hospitals would misclassify patients as having COVID-19 in order to increase revenue.
The rumor stems from the fact that the Coronavirus Aid, Relief, and Economic Security Act does provide an additional 20 percent payment for Medicare patients who require treatment for COVID-19.
But even with that additional 20 percent, hospitals lose money on every Medicare patient they treat.
Prior to the pandemic, Medicare — generally for Americans 65 and older — reimbursed hospitals about 70 cents on the dollar for treatment provided. With the 20 percent boost authorized in the CARES Act, reimbursement for COVID-19 patients is 84 cents on the dollar — still a 16-cent loss.
“We had a lot of questions early on about whether our hospitals were making a ton of money on those patients, and the answer is absolutely not,” Lonborg said.
Patients with Medicare are often those with the most serious, and costly, medical needs. The virus tends to be most harmful to older people.
In Colorado, people 60 and older currently make up 19.11 percent of all confirmed COVID-19 cases and 88.9 percent of deaths, according to the Colorado Department of Public Health and Environment.
Hospitals also lose money on every patient treated that uses Medicaid — the federal program for Americans with limited income — which also reimburses well below the cost of care, currently 70 cents on the dollar.
The only COVID-19 patients for whom hospitals are able to recoup the entire cost of treatment are those with private insurance.
Claims that hospitals could be miscoding their patient diagnoses or inflating their numbers for more funding, Lonborg said, have been “prolific and largely unfounded.”
The Business Journal recently spoke with hospital leaders in Colorado Springs about how the pandemic and treatment of COVID-19 patients has impacted their overall finances.
UCHealth, which has several clinics in Colorado Springs along with Memorial Hospital Central and Memorial Hospital North, invested heavily in additional resources in the early days of the pandemic.
UCHealth spokesperson Dan Weaver said that around mid-March, when UCHealth began canceling or postponing non-emergency surgeries and procedures, it took a significant toll on the health system’s overall revenue.
“Really throughout the pandemic we were seeing both increased expenses as we prepared to care for patients with COVID-19 infections — that included things like acquiring additional PPE or construction projects, acquiring additional ventilators, medications, etc. — but we also experienced some significant drops in revenue,” Weaver said.
The investment across the system was “easily in the millions of dollars.”
Unaudited figures — which are subject to slight changes — show that from March through June, UCHealth’s revenue decreased by $204 million.
Weaver noted that UCHealth has been able to mitigate a large portion of its losses through the Provider Relief Fund established in the CARES Act. UCHealth has received $160 million in relief funds and has made up some of the additional revenue losses through cost-cutting measures.
“Though it does not fully cover our losses, I’d say that [Provider Relief Fund] support has been essential to helping us reduce our financial losses,” Weaver said.
Since the pandemic began, UCHealth hospitals have treated more than 2,000 COVID-19 patients, more than 1,800 of whom have recovered and been discharged, Weaver said.
And the majority of patients the health system has seen have had either Medicare or Medicaid.
UCHealth has also treated uninsured patients, Weaver said, and the smallest percentage of its COVID-19 patients are those with private or employer-sponsored insurance.
“Medicare does provide a little bit extra for hospitals in reimbursement for taking care of those patients, but that is only for those Medicare patients, so that additional funding … it’s not available for Medicaid or really any of the other patients,” Weaver said. “I think the intent behind that additional payment is just to bring the reimbursement up to a little bit closer to what it actually costs to provide them care.”
Looking forward, Weaver said the pandemic will likely continue to take a toll on UCHealth’s finances.
“For the coming months, the rest of this year, as well as into 2021, hospitals aren’t sure what’s going to come,” Weaver said. “Our volumes and our revenue remain down. We remain concerned that some patients might not be seeking the care that they need, because even in the primary care areas and vaccination areas, we still see much lower volumes there, which makes us a bit concerned that some of those patients aren’t getting their preventive vaccinations, and some of the preventive care that they might need.
“So I’d say that’s concerning. But from an overall revenue standpoint, we’re expecting our volumes and revenue to remain down for the foreseeable future.”
Eddie Sim, the executive vice president and chief operating officer for Centura Health, which operates Penrose-St. Francis Health Services, said the hospital has seen significant declines during the pandemic, both in patient volume and in overall revenue.
Since hospitals have been able to resume the elective surgeries that were prohibited during Colorado’s stay-at-home order, revenue has started to rebound.
“Our revenue and volume trend since our ‘reopening’ on April 27 indicates that inpatient admissions and surgical volumes (both inpatient and outpatient) are returning to pre-COVID volumes, while our emergency department visits and outpatient/ambulatory care is around 85-90 percent of our former volume run rate,” Sim said. “At these current run rates, we will not be able to make up the substantial revenue losses we experienced at the height of the pandemic.”
Sim noted that Centura’s overall revenue losses do not reflect additional expenses for PPE, expanded COVID-19 testing, construction of additional negative pressure isolation rooms, “nor the investments we made in our people to support their health and well-being during this prolonged crisis.”
Asked whether their hospitals ever exaggerated or misclassified COVID-19 diagnoses to receive additional funding, Sim said Centura is not inflating its numbers and would have no incentive to do so.
“Daily we report our COVID-19 results to the Colorado Department of Public Health and Environment, as requested by the state,” Sim said. “Centura Health always has, and will continue to prioritize the safety and well-being of our incredible caregivers — to ensure we can safely care for our communities when they need us most across our hospitals, clinics, ambulatory settings, and care sites.”
Centura Health did not respond to inquiries about its Provider Relief Funds by press time.
CHILDREN’S HOSPITAL COLORADO
The direct impact of the pandemic on pediatric patients has been different from its effects on the adult population, according to Greg Raymond, regional chief operating officer at Children’s Hospital Colorado, Colorado Springs.
“And what I mean by that is the number of infected individuals in the community that are of pediatric age that have required hospitalization is different than on the adult side.”
But despite its patient base being less impacted by the pandemic, Children’s has still incurred a hefty financial toll.
“Where the financial impact comes into consideration is the expectation, as a community partner, as a member of the Colorado Hospital Association, and as a local resource here in Colorado Springs,” Raymond said. “Our response mirrored that of our adult hospitals to respond to this global pandemic.”
From an operational standpoint, Raymond said Children’s made all of the same decisions and accommodations as adult hospitals, “with the commensurate downstream impacts to our ability to pay our bills … and be able to provide the services that kids and their families need during this period.”
They, like all hospitals, also suffered a significant blow to revenue during Colorado’s stay-at-home period.
“With the public health order, which suspended the provision of elective services … such as elective surgeries, elective diagnostics like radiology and other types of lab work, and elective outpatient visits, we saw a significant fall-off during that six-or-so-week period of time,” Raymond said.
The Children’s Hospital Colorado system has also seen a drop-off in patient volume in its emergency departments, and the system is projecting well over $100 million in lost revenue overall.
“We’ll continue to monitor that,” Raymond said. “And this is not a six-month consideration because of the economic downturn the pandemic has created; it influences the ability of individuals to pay their hospital bills when they do receive care, and depending upon whether they have commercial insurance or they have Medicaid or Medicare, that all influences the ongoing financial liability of the health care organizations as well.”
Children’s also was aided by the Provider Relief Fund, receiving just over $49.5 million.
Since March 2020, Children’s hospitals statewide have cared for more than 800 COVID-19 pediatric patients.
Raymond said the majority of Children’s patients tend to utilize either Medicaid or other government-funded care, though some use private insurance. A small portion of its patients are uninsured.
“We take care of all kids, regardless of the ability to pay,” Raymond said. “Seventy-five percent of the kids we take care of either have Medicaid or another government-funded health plan. And so the vast majority of the care that we provide is underreimbursed relative to our costs.
“For someone to imply that the incentives were being manipulated at the expense of these COVID patients for the financial betterment of our organization is simply not true.”