Coronavirus stimulus only short-term fix for rural hospitals

One by one, COVID-19 outbreaks popped up in April and May at meatpacking plants across the country, fanning fears that the infectious coronavirus could spread rapidly into rural states.

Plants closed temporarily in small metro areas like Waterloo, and Sioux Falls, but also smaller Iowa towns like Tama, Columbus Junction and Perry.

Leaders at Buena Vista Regional Medical Center in Storm Lake, a northwest Iowa town of 10,500 with a Tyson Foods packing plant, knew their time would come, too.

'We just didn't know to what degree,” said Rob Colerick, the hospital's chief executive officer and administrator. 'I mean, you saw it in Columbus Junction. You saw it in Waterloo. You saw it in Sioux Falls. Certainly, the dynamics were present to have a similar situation here.”

What Colerick and other rural hospital administrators, industry leaders and researchers did know was that they already had entered the pandemic last spring facing financial crises so extreme that hospital closings were a real possibility in small towns across the nation.

Most of those at risk were at critical access hospitals - small hospitals with 25 or fewer general care beds that people in rural areas depend on for accessible health care. Three out of every four of the nation's critical access hospitals had negative operating incomes going into the pandemic, according to an analysis done by a collaboration of news outlets that are members of the Institute for Nonprofit News, including IowaWatch. The main reason: It costs more to treat people than insurance and patients pay.

The national operating income rate has worsened, from 69 percent of the critical access hospitals running with negative operating income in 2015 to 75 percent in 2019, the analysis showed.

Compounding the problem, hospitals focusing on handling the pandemic last spring were forced to cancel non-emergency medical procedures that would have raised needed income.

'Some of the federal stimulus, particularly in rural hospitals, is covering that expense but certainly is not providing any type of padding financially in the future,” said Kirk Norris, president of the Iowa Hospital Association.

That federal aid came from the CARES Act and the Paycheck Protection Program, but also advance Medicare payments for roughly 60 percent of the nation's hospitals willing to comply with rules attached to repaying the advances.

The cash boost was so substantial that some hospital leaders in the Midwest said in interviews they had stronger income this past summer than in summer 2019.

But the infusion was only a temporary lifeline, not the permanent fix hospital industry leaders say is needed to keep some critical access hospitals from closing.

'The subsidy, the support helped to keep them afloat for a couple months,” said Mark Holmes, director at the University of North Carolina's Cecil G. Sheps Center for Health Services Research, which keeps tabs on hospitals at risk of closing because of financial hardship.

'But eventually there comes a time,” Holmes said. 'And a very common experience is: By Wednesday night they realize they can't make payroll on Friday. So it's often a pretty short window when these things are announced. I think that's going to be the type of pattern that we see.”

The scenario Holmes laid out could happen within a year without more federal funding for hospitals that entered 2020 already on shaky financial ground, he said.

Meanwhile, infection rates have been rising in several rural states. Nebraska, Kansas, Missouri, Indiana and Iowa could fill most, if not all, of their intensive care beds around the December holidays, projected University of Washington researchers who are tracking and predicting impacts of the virus.

'It's hard to imagine us coming back with any type of cheery disposition to say, ‘Oh, wow, we turned a corner,'” said Michael Topchik, national leader for the private rural hospital assessment firm, Chartis Center for Rural Health. 'You'll continue to see more hospital closures.”

The closures could be catastrophic for small towns because they tend to be the largest or second-largest employer in their communities, Topchik said.

Temporary fixes

Nationally, 132 rural hospitals have closed since 2010, including 15 this year, the Cecil G. Sheps Center for Health Services Research reports in a database.

The CARES Act has pumped $175 billion into the nation's hospitals, clinics, medical practices, cities and other entities treating and testing for COVID-19 - a share of which reached rural hospitals. Stimulus aid provided an additional $10 billion specifically for rural hospitals and $1 billion for specialty rural hospitals, which are suburban hospitals serving primarily rural areas and that operate on small margins.

Health care and social assistance programs, including some rural hospitals, also collected $67.4 billion in Paycheck Protection Program money, the Small Business Administration reported.

Still, two of every five critical access hospitals in the country lost money after non-patient revenue was added to their ledgers in the last fiscal year for which reports exist. They received an average of $3.5 million, each, in CARES funding, according to interviews and analysis of Health and Human Services data from July and hospital financial data from the American Hospital Directory.

One-third of the nation's critical access hospitals earned enough to report net income gains of more than $1 million in their last fiscal year; these facilities received, on average, $4.5 million from CARES funding.

Hospitals also were eligible for $92 billion in accelerated and advance Medicare payments. But those payments must be paid back to the Centers for Medicare and Medicaid Services.

Critical access hospitals originally had to start paying that money back in Medicare credits one year after receiving the first advances in April and May, but large hospitals had to start 120 days after receiving it.

That would have been about now for the large hospitals. But Congress last month stretched the period the money is owed by all hospitals to as much as 29 months. Congress also dropped the interest rate for overdue sums from 10.25 to 4 percent. Industry groups had sought forgiveness of the repayments.

Trying solutions

The Genesis Health System, a 17-county, 75-location operation in Eastern Iowa and western Illinois, collected more money than it spent heading out of summer at its three critical access hospitals, in Maquoketa and DeWitt in Iowa and Aledo, Ill.

Curt Coleman, Genesis' president of critical access hospitals, said each facility had been on track to lose up to $1.5 million from April through June after canceling non-emergency clinical procedures.

Genesis hospital leaders started meeting in mid-March and continued nearly non-stop through April with one topic: COVID-19, Coleman said. As summer came and went, hospital leaders felt they had gained a better grip on treating the virus.

Early planning was cited in interviews with rural hospital leaders as a way those operators tried to respond to the virus as it started to spread. So were clear communication internally and with the public, and willingness to take extraordinary steps to deal with the pandemic.

CARES gave the three critical access hospital amounts ranging from $300,000 to $350,000 in April and another $3.4 million to $3.6 million in the second wave of stimulus money for rural hospitals. When Jackson County Regional Health Center in Maquoketa qualified for another $1.5 million from the Paycheck Protection Program, it could cover three months of salaries, Coleman said.

'So, COVID actually was, from a financial standpoint, helpful to us,” he said.

Maquoketa's hospital financial reports had shown net income of $382,756 in the fiscal year ending June 30, 2019, but without aid from foundations, bequests, gift shop sales and the federal government, the hospital would have experienced a negative operating income of $1.3 million.

'It's just a bit ironic that it took a pandemic to really provide some additional stimulus and support for hospitals that were losing money on a normal business day,” Coleman said. 'And it took a pandemic and it took some stimulus to, kind of, stabilize that out.”

MercyOne Elkader Medical Center, in northeast Iowa, used its $3.5 million in CARES funding to offset revenue losses but also to prepare for COVID-19 in the coming months, hospital CEO Brooke Kensinger said.

Some of the money was to fund capital projects that help the hospital with health assessments, isolation, transportation and treating the virus, she said.

Her hospital did not seek accelerated and advanced Medicare payments, she said.

'Many of the actions that we took in the spring in preparation for COVID-19 have paid off,” Kensinger said. 'We were very conservative with our spending and chose to hold off on filling positions that were open until we were further into the pandemic and understood how it would affect our community (and) hospital.”

Other attempts to work through the pandemic, administrators and rural health researchers said in interviews, include the expansion of telemedicine, relying on a fixed annual Medicare payment instead of payments tied to individual procedures, and working within hospital staff's capacity to provide health care.

Beyond stimulus

While pandemic-related funding helped rural hospitals get through summer, the bigger questions about their stability deal with finding long-term solutions, industry leaders and analysts and hospital administrators said in interviews.

'What happens when we're no longer in a pandemic?” Genesis' Coleman asked. 'How do we fix this reimbursement, the reimbursement issue for our hospitals, and help them become sustainable? I certainly think Medicare can play a role on that. Medicaid, the state can play a role in that. I would like to see our commercial insurance carriers play a role on that because they're all contributing to the problem now.”

Meanwhile, patient demographics are changing in rural areas.

A little more than 19 percent of Americans lived in rural areas, according to the 2010 census - down from 21 percent in 1990. The median age for rural residents, 51, reflects an older population than in urban areas, where the median age is 45, the census said.

Topchik, at Chartis Center for Rural Health, said he expects hospitals' financial struggles to get worse as COVID-19 progresses. Topchik said rural hospitals need help with something big - on par with creating the critical access hospitals designation in the 1997 Balanced Budget Act, or the 1946 Hill-Burton Act that established ways to give health care to people who cannot afford it. Without that, 'you're going to continue seeing the erosion of the safety net,” Topchik said.

'You're going to have this division in society of the haves and the have-nots. The urban versus rural divide will get wider. And, it's very, very difficult to maintain a quality of life in a rural area if you don't have modern, quality health care at an affordable price.”

The Iowa Center for Public Affairs Journalism-IowaWatch is a nonprofit, news website that collaborates with news organizations to produce explanatory and investigative reporting. Read more or support our journalism at www.IowaWatch.org. This piece is part of a collaborative reporting project with other members of the Institute for Nonprofit News: Wisconsin Watch, the Institute for Nonprofit News, Reveal from The Center for Investigative Reporting and Side Effects Public Media.