Iowa's smallest hospitals could be headed for 'financial disaster' due to pandemic challenges

Coronavirus pandemic has caused funding challenges

Buchanan County Health Center is a critical access hospital and recently completed construction on a 74,000 square-foot
Buchanan County Health Center is a critical access hospital and recently completed construction on a 74,000 square-foot expansion and remodel. (Liz Martin/The Gazette)

As novel coronavirus infects more Iowans each day, the state’s hospitals are adjusting to a new dynamic created by the pandemic — but at a cost.

Mitigation efforts deemed necessary to preserve supply and prevent spread among patients, along with a change in patient behavior and other unintended consequences as a result of the pandemic, have created financial challenges for all of Iowa’s hospitals.

The state’s smallest hospitals especially — which already are strapped for cash — could be heading for a “financial disaster,” said Todd Linden, a health care consultant and the former president and chief executive officer of Grinnell Regional Medical Center.

Gov. Kim Reynolds’ recent move to ease certain coronavirus-related restrictions offers some relief, but hospital officials say it does not address all the issues leading to their pandemic-related revenue losses.

Federal aid will help get Iowa’s Critical Access Hospitals through most of the short-term fallout caused by the pandemic, said Steve Slessor, CEO of Buchanan County Health Center in Independence. However, he added, “There will need to be conversations about business models for all hospitals in the long-term. It’s not going to be a simple switch, even if everything goes back to the way things were on March 1.”

Across the United States, hospitals serving rural areas have struggled in recent years to gain enough revenue to stay open while providing adequate health care.

As the populations in rural areas decline, more than 170 rural hospitals nationwide have shut their doors since 2005, according to the Sheps Center for Health Services Research at the University of North Carolina.


So far in 2020, 10 rural hospitals across the country have permanently closed. That includes closures in the midst of COVID-19, national reports indicate.

No closures have occurred in Iowa, but rural hospitals in the state have been identified as at-risk entities. This past year, a Chicago-based consulting company released a financial analysis on hospitals across the United States and found 17.9 percent of Iowa’s rural facilities “are at high risk of closing unless their financial situations improve.”

“How this current crisis is going to change that, I don’t have a clue. But coming into this, things weren’t looking good,” said Bill Menner, president of the Iowa Rural Health Association and founder of an Iowa-based rural consulting group.

According to the Iowa Hospital Association, Iowa hospitals are losing $1 million a day.

“We have more hospitals today than two months ago, three months ago before this happened, with negative operating margins than any time in my career,” said Kirk Norris, Iowa Hospital Association president and CEO, in an interview with IowaWatch.

He has been with the professional association for Iowa’s 118 hospitals for 33 years, serving as its president since 2002.

“I’ve heard of cases in some rural communities, even though they didn’t have any (coronavirus) patients, this has led to their revenues declining up to 40 percent,” Menner said.

After the first cases of COVID-19 were identified in Iowa in March, hospitals began implementing new policies to mitigate the risk of spread among patients and staff, including postponing non-essential and otherwise elective surgeries.

Elective and other nonemergent surgical procedures are profitable services that help fund other necessary operations within a hospital setting and for rural hospitals. These procedures are their bread and butter, experts say.


“The notion of cutting down those services when they need to be ramping up the ability to meet needs of the community when it comes to COVID-19 is going to put a lot of hospitals in clear financial strain,” Linden said.

This past week, Gov. Kim Reynolds announced hospitals and clinics could begin resuming elective procedures — but only if they met a “stringent list of criteria,” which entails having enough personal protective equipment and a plan for continued COVID-19 precautions, among other caveats.

“I do know that a few surgeries aren’t going to reverse the trend of hospitals losing lots of money, but it does open the door to some revenues for some facilities,” Menner said.

Buchanan County Health Center has plans to resume elective surgeries somewhere between 30 percent to 50 percent of their normal capacity in the coming days, its CEO, Slessor, said. However, officials plan to evaluate week by week and make a determination whether to scale back or continue as planned based on the coronavirus-case count.

“If we truly felt the resumption of surgeries now would have a significant possibility of putting us in a rough spot in two to three weeks in the event of a surge, we wouldn’t do it,” Slessor said.

In the five to six weeks elective surgeries were postponed, Slessor said his hospital represented a loss of about 50 percent to 60 percent of its normal revenue. In March — half of which included a normal time period — the hospital lost about $279,000 in operating margin.

In April, the hospital expects to loose somewhere between $600,000 and $800,000.

Even then, resuming these surgeries will not make up the difference. The pandemic has led Buchanan County Health Center to close its sleep studies, elective radiology exams such as mammograms and other outpatient services. Even emergency room visits are down, Slessor said.

“The number of heart attack and stroke patients is down significantly. I can’t imagine COVID-19 causing less of that to occur, so are they just not coming in? If so, then there will be worse outcomes as a result, leading to a long term clinical impact and longer term business impact,” he said.


Norris of the Iowa Hospital Association said community hospitals, at best, have six months of operating cash on hand and in some hospitals less — 70 to 80 days.

The problem is tied to the hospitals’ business model, which accounts for 80 percent of its business in outpatient services, although Norris said that could be as high as 90 percent at some places.

That meant billings for a lot of clinic visits, rehabilitation appointments and primary care.

Margins for Iowa’s Critical Access hospitals, designated by the Centers for Medicare and Medicaid Services to ensure that rural patients have access to a hospital, were a negative 2.8 percent, according to IowaWatch.

About 40 of them have had, on average, four inpatients or fewer, putting stress on their budgets.

Surge preparation

Public health officials and other leadership within Iowa’s health care systems have expressed concern for weeks on the system’s capability to care for a sudden surge of COVID-19 patients seeking care at area hospitals, should members of the public fail to practice adequate social distancing.

State officials say that, so far, Iowa has been able to “flatten the curve,” or guarantee there isn’t a sudden uptick in coronavirus patient admissions to the hospitals.

But rural areas of the state aren’t immune to outbreaks.

As of this past week, about 84 percent of rural counties nationwide have reported a case of COVID-19, with more than 54,000 cases and more than 2,000 deaths, according to the Rural Policy Research Institute at the University of Iowa.

Because capacity at rural hospitals is much smaller, Menner said a surge may hit them sooner and harder.

“If every hospital is struggling to care for their patients, the question becomes whether they have enough medical professionals to do that,” Menner said.


At Jones Regional Medical Center in Anamosa, CEO Eric Briesemeister said the hospital was short on inpatient nurses before COVID-19, an issue that has been “exacerbated” by the pandemic.

Officials have moved staff — in particular, nurses — to areas of need within the hospital — the emergency department, the urgent care clinic and the inpatient floor.

Buchanan County Health Center also has taken advantage of the lull in patients to cross train employees in other areas of the hospital, in the event there is a surge, Slessor said.

The Jones County-based hospital’s average daily census is eight patients. But in the event of a patient surge, it could meet the needs of about 30 patients at the maximum.

Finding the staffing and supplies to care for that many patients would be a challenge, Briesemeister said, but the hospital does benefit from being part of the UnityPoint Health system.

“Essentially we’re asking hospitals to handle more than what they’ve ever done with the same amount of resources,” Briesemeister said. “That’s where it’s important — whether it’s rural or urban — to act like one hospital. No matter where you are, that’s where the resources go.”

But for those staff members who can’t be shifted elsewhere, many health care officials also have taken steps to scale back the number of non-essential employees within its facilities, particularly in those areas of the hospital that have significantly reduced the number of daily services or closed entirely.

Nearly 200 hospitals and hospital systems nationwide also have furloughed their employees, according to a daily tally by the industry publication Becker’s Hospital Review. Earlier this week, UnityPoint Health, the Des Moines-based health care system, announced reduction in hours as well as furloughs for staff working in areas not operating at capacity.


“These changes in our workforce are needed to ensure we can continue meeting the health care needs of our communities into the future,” UnityPoint Health’s then-president and CEO, Kevin Vermeer, said at the time of the announcement.

Buchanan County’s Slessor said that despite the financial turmoil rural hospitals are currently facing, he does see the pandemic as a driver of new innovation within these facilities — in particular, with telemedicine.

“A lot of hospitals now have raced to implement new things within a couple days that otherwise would have taken months,” Slessor said.

The Iowa Center for Public Affairs Journalism, a nonprofit and nonpartisan news service, contributed to this report.

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