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Deep Concern For Some Iowa Hospitals’ Viability After COVID-19 Crisis

Lyle Muller
Iowa hospitals will feel the financial strain of responding to the COVID-19 pandemic as more patients seek care, a top hospital industry official said in an IowaWatch interview.

Some Iowa hospitals ramping up their efforts to treat COVID-19 victims will not survive the pandemic without an infusion of cash, the head of the professional association for those hospitals said.

Moreover, an rural-urban split that puts rural hospitals at a disadvantage when attracting resources to treat patients will widen, Iowa Hospital Association President Kirk Norris said in an IowaWatch interview.

“We need a transition model for rural health care or – even assuming we get back on our feet, and they say this is the next six or nine months – there will be hospitals that will not recover from this and will close in Iowa,” Norris said.

“These community hospitals need cash now. They need to keep people in place. They need to stay open. And you can’t lay off half of our work force.”

IHA Photo
Kirk Norris, president and CEO, Iowa Hospital Association

Rural hospitals already were struggling getting adequate Medicare reimbursements for patients they treat because of the formula Medicare uses to pay hospitals for patients in the federal insurance program. But now, uncertainty over how big Iowa’s COVID-19 surge will be and a change in the kinds of medical cases hospitals treat figure to make things worse exponentially, Norris said.

“You were cash flowing before, you were not making money. Now you’re in a serious negative cash position. It’s not long before you have to decide whether or not you can have – well, you don’t have to decide. If you don’t have money to pay your people, you’re effectively not open, unless people are going to work for free.”

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

Margins for Iowa’s Critical Access hospitals, designated by the Centers for Medicare & Medicaid Services to ensure that rural patients have access to a hospital, were a negative 2.8 percent, IowaWatch previously has reported. About 40 of them have had, on average, four inpatients or fewer, putting stress on their budgets. None has closed in recent years, a problem other Midwest states have experienced.

Norris’ dire projections come as Iowa announces daily more COVID-19 cases, and deaths. State and public health officials anticipated a flood of cases in the coming weeks.

A model produced by health researchers at the University of Washington on Thursday had projected a May 1 peak in the virus’ demand on Iowa hospitals but that changed over the weekend to April 26. Moreover, the model dropped dramatically its prediction of a 358-bed shortfall created by needing 4,655 hospital beds to Iowa having a surplus when needing 726 beds.

The rapidly changing projections also showed Iowa having enough intensive care unit beds to handle the virus outbreak. Instead of needing  702 intensive care unit beds, as projected late last week, the state will need 150, the Washington researchers’ model showed after an April 5 update. And, instead of needing the 562 ventilators the projections showed late last week, Iowa is projected now to need 127. (The previous two paragraphs were updated on April 6 to show the updated projections.)

State Epidemiologist Dr. Caitlin Pedati cautioned at a Thursday news briefing that models only are as good as available data.

“Models are great and they’re important and they’re helpful to us to understand what might lie ahead,” Pedati said. “But they can be challenging, right? Whether we’re talking about predicting the weather or whether or not we’re predicting the stock market. There’s a lot of variation into these kinds of things.”

Iowareported on Sunday, April 5, it had counted 868 positive COVID-19 cases total, 9,973 negative tests and three new virus-related deaths, for a total of 22. Eight of those deaths were reported Sunday. 

“We’re always looking at the data but we’re always recommending the control measures that we know are going to help,” Pedati said at the media briefing. “And in this case, it’s really the social distancing measures and talking about staying home when you’re sick, washing your hands and those basic measures that everybody can do to help reduce the spread of the virus.”

Norris said in the IowaWatch interview community hospitals, at best, have six months of operating cash on hand and in some hospitals less – 70 to 80 days.

“So, immediately, when you dry up the bulk of your business, and you still have all your expenses, you’re burning through cash,” he said. “And, you’re immediately confronted with the question of how do we manage that?”

IHA Photo
Jennifer Nutt, vice president for nursing and clinical services, Iowa Hospital Association

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.

“That has dried up,” Norris said. The change started immediately after public health and government leaders told people to stay home as a way to flatten the curve that shows up on charts tracking COVID-19’s spread. “Flatten the curve” means making sure the peak in cases is less steep than it would be without the public taking precautions to stop the virus’ spread.

Norris said he has been in conversation with U.S. Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee about the need to get cash into hospitals. Grassley has sponsored bills that would change the Medicare formula and increase payments to low-volume rural hospitals but they have not been passed into law.

2017 bill introduced by Grassley, Sen. Amy Klobuchar (D-Minn.) and Sen. Cory Gardner (R-Colo.) and now co-sponsored by 21 senators was referred to the finance committee in 2017 but hasn’t come out of there.

Grassley got extended funding in an appropriations package last year for some Medicare reimbursement but only until May 21. That measure adjusts the geographic index for Medicare payments so that rural health care providers can get more, Grassley’s office reported.

Of Iowa’s 118 hospitals, 82 are designated by Medicare as Critical Access Hospitals.

A critical access hospital is in a rural area and no more than 35 miles from another hospital. Another 10 are designated as rural Prospective Payment System hospitals, receiving predetermined, fixed Medicare payments. Norris said all are at financial risk because Medicare payments won’t fund demands on the hospitals for health care.

Early, as the virus began to spread, the thinking in Iowa was that urban hospitals would move patients with general medical conditions during the COVID-19 surge to rural hospitals, and rural hospitals would send sicker patients to urban hospitals, Norris said.

“Generally, that referral pattern works,” he said. “The problem with that thinking is, everything’s drying up in the urban hospitals, too, other than emergencies. So, when you normally would find an acute care patient wing in an urban hospital, there’s much less of that going on.”

Bill Menner, executive director of the Iowa Rural Development Council, said his biggest concern is having enough health care workers in Iowa to get through the pandemic.

“At the end of the day, the question becomes: how does a rural hospital deal with a surge of patients when they have a limited number of health care professionals?” Menner, the U.S. Department of Agriculture’s state director for rural development in the Obama administration, said in an IowaWatch interview. “It’s less about space. It’s less about beds. It’s more about people.”

Hospitals in Iowa are creating resource labor pools, sending home workers who can do their jobs from there and reassigning people into whatever job is necessary. Licensed nurses who are retired or who don’t work in hospitals – administrators and educators, for example – are in the resource pool,Jennifer Nutt, the Iowa Hospital Association’s vice president for nursing and clinical services, said. Nurses from other hospitals can be called to help, too.

How many medical professionals will be needed to treat patients remains to be seen, Nutt said. “A lot of that will depend on how many people will have to be removed from the work force because they’ve been exposed,” she said.

Iowa hospitals train for emergencies but drilling specifically for something like the COVID-19 outbreak would have been difficult, Nutt said. “This is something our hospitals haven’t faced before,” she said.

Smaller hospitals have enough capacity to handle current cases but would need help with a rise in cases, she said. “They would have to borrow staff from other hospitals or the state resource pool.”

Surge plans are in place at her UnityPoint Health—Grinnell Regional Medical Center, Dr. Lauren Graham, the hospital’s medical staff president, said. Graham said the plan includes deploying workers from their normal jobs to where hospital demand exists. The private, nonprofit hospital has 49 beds, five of which are intensive care unit beds and three that are step-down beds for intermediate care that requires more than general but less than intensive care.

Graham has written an open letter to the public in Grinnell, urging people to stay at home. Grinnell is in Poweshiek County, where one man older than 81 with COVID-19 died in late March. “We are seeing just the tip of the iceberg,” Graham’s letter warned.

Graham said she wrote the letter to flatten the curve.

“I felt compelled to speak now as I see that cases are here in Iowa, and we are not taking the necessary precautions that more than half the country has taken to keep the virus from spreading,” she wrote in an email to IowaWatch. Most U.S. states have shelter-in-place orders but Iowa does not, although the state is under a Public Health Emergency Declaration that has closed schools and put limits on bars and restaurants and some retail stores, and prohibited social gatherings of more than 10 people and nonessential and elective surgeries until April 30.

“Stay home. Shelter in place if you can. This is the time to change course by staying home if we can to dramatically slow the spread of the virus and enable healthcare to keep up with the new cases.”