City hospitals are no longer seeing a steady stream of COVID-19 patients through their doors, but now they are left to clean up the financial mess from the pandemic.
Most of the region’s biggest health systems are reporting massive financial losses for the first three months of the year.
Northwell Health, the state’s largest private health system with 19 hospitals, lost $141 million. New York–Presbyterian lost $128.5 million on the operations of its 10 campuses. Montefiore Health System, which runs facilities in the Bronx and the Hudson Valley, lost $96.8 million. The results represented loss margins of 4% to 6% for the systems.
As hospitals ratcheted up spending on staffing and supplies, they also had to stop all nonurgent surgeries and convert their money-making operating rooms into intensive care units to make room for COVID-19 patients. Individuals shied away from going to emergency departments, physician offices and radiology practices, reducing health systems’ revenue further, said Ken Kaufman, chair and managing director of healthcare consulting firm Kaufman Hall.
“It was a double whammy,” Kaufman said.
New York–Presbyterian said the financial impact was worse than it had first projected when the outbreak worsened in mid-March.
“Expenses for personal protective equipment (PPE) and incremental and backfill personnel, including clinicians from outside of NYPH, required to meet inpatient demand, as well as expenses for transportation, housing, food and child care resources to support that personnel, greatly exceeded estimate,” it wrote in its financial statement.
The first-quarter results are part of health systems’ obligations to bondholders, but only a narrow slice of New York’s hospitals are represented.
Smaller institutions in the Bronx, Brooklyn and Queens without ties to a regional system, especially those that treat mostly Medicaid and uninsured patients, could fare even worse. They typically only report financial results annually. Public and perennially cash-strapped healthy system NYC Health and Hospitals also hasn’t yet disclosed the pandemic’s impact on it.
Mount Sinai Hospital was an outlier, reporting $33.3 million in operating income in the first quarter, which represented a drop-off of about one-third from its performance in early 2019.
The hospital said its operating profit was driven by an improvement in revenue before it began feeling the adverse effects of COVID-19 in the final two weeks of March. The results include the activities of its Upper East Side and Queens campuses but not its Beth Israel, Brooklyn, Morningside and Mount Sinai West hospitals, which have lost tens of millions of dollars in recent years.
Local hospitals began to see some relief from the federal government in mid-April, just as the outbreak was hitting its peak.
A complete picture won’t be available until later in the year, but health systems thus far have said federal support has been insufficient.
Northwell received $1 billion from federal Cares Act programs, New York–Presbyterian got $567 million, and Mount Sinai received about $263 million, according to financial filings. They also benefited from Medicare providing advance payments to hospitals to improve cash flow, which sent billions more to area facilities. Hospitals will have to pay that money back, however. If they don’t refund Medicare within a year, they face a 10.25% interest rate on outstanding balances.
The Greater New York Hospital Association is lobbying Congress to convert those advance payments into grants. It’s also seeking more money for state and local governments to avoid Medicaid cuts that would hurt hospitals. The measures could be part of a fourth coronavirus relief package, which is currently being debated in Congress.
Hospitals have several options in the meantime to free up cash, Kaufman said. Labor costs represent more than half of most hospitals’ expenses, and some might look to cut temporary staff. That issue is more fraught in New York, where hospitals are concerned about a second wave of cases.
Facilities also could look at their real estate assets and reevaluate whether they need as much office space as virtual patient visits and remote work become more commonplace.
Larger hospitals also could convert some short-term borrowing into long-term debt. For those facilities that mostly treat Medicaid patients, access to capital is more challenging, and the state might need to intervene to prop up some hospitals. The state already commits hundreds of millions each year toward that cause.
“At some point we’ll have to have an accounting of hospitals that will stand on their own and those that can’t,” Kaufman said.
This article was originally published in Crain’s New York Business.