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Iowa Hospitals' Financial Losses Mount Amid COVID-19

University of Iowa Hospitals and Clinics.
Lauren Wade
University of Iowa Hospitals and Clinics.

Iowa hospitals lost an estimated $433 million in March through October because of COVID-19, the Iowa Hospital Association said in a report released Wednesday, Dec. 16.

The association reported that the state's hospitals have spent $1.25 billion to equip hospitals for and to care for people with the highly contagious coronavirus that has killed 3,354 Iowans and 307,076 Americans.

Provider relief funds from federal government stimulus programs offset much of those costs and were included in the calculations that resulted in the loss estimate, the association reported. The projection did not include money from some federal programs, like the Paycheck Protection Program and the Federal Emergency Management Agency, or state funding, the association reported.

In early November, Gov. Kim Reynolds approved sending $25 million in CARES money the state received to Iowa hospitals for COVID-19 relief. Congress passed the Coronavirus Aid, Relief and Economic Security Act in March.

Hospital leaders in Iowa say they’re worried about whether or not they will have to return some advanced and accelerated Medicare payments they received earlier this year. Hospitals were able to receive in advance three months of anticipated Medicare billings, although only 77 Iowa hospitals applied. They were eligible for $928.3 million in accelerated and advance Medicare payments, IowaWatch reporting shows.

Hospital leaders fear changes in a formula used to calculate what the hospitals were entitled to could force some to pay back some of the money at a time when they are strapped for cash.

The new report was the latest in a year of grim news about financing for the 118 Iowa Hospital Association members. CliftonLarsonAllen, a nationwide consulting firm with offices in Des Moines and Cedar Rapids, conducted a study for the association in March through October for the report. That study showed that half of the state’s hospitals were operating at a financial loss at the end of October, the association reported in a news release.

Kirk Norris, President and CEO, Iowa Hospital Association
dejong photography
Kirk Norris, President and CEO, Iowa Hospital Association

“The report underscores the immense financial strain Iowa hospitals and health systems are facing because of COVID-19,” Kirk Norris, the association's president and CEO, said in a prepared statement.

“We also must remember that many Iowa hospitals were experiencing severe financial issues before COVID-19. A new rural emergency hospital model is needed for hospitals to survive beyond the pandemic."

Norris said 2021 could be devastating for many Iowa hospitals and called Congress and the state Legislature for potential solutions.

The problem is not unique to Iowa. Three out of every four of the nation’s small critical access hospitals with 25 or fewer beds had negative operating income going into the pandemic, according to an analysis done by a collaboration of news outlets that are members of the Institute for Nonprofit News. IowaWatch was part of that collaboration and compiled data for a statistical analysis by Reveal from The Center for Investigative Reporting.

The Iowa Hospital Association study relied on a Databank survey. Its report listed the following trends from March, when COVID-19 hit Iowa, through October:An 11% decline in outpatient visits but 8.3% increase in length of stay for acute care patients who are admitted.

A 17% decline in inpatient discharges but 26% increase in expenses per discharge.
A 22% decline in ambulatory surgeries and 24% decline in inpatient surgeries.
A 29% decline in operating margin, although the operating margin for Iowa hospitals is 2% with federal support. Operating margin is the difference between expenses needed to treat patients and revenue earned for that treatment. Many hospitals also get support from sources such as foundations, donors, bequeaths and other nonpatient revenue-producing enterprises.

The drop in ambulatory and inpatient surgeries means less revenue for the hospitals while they’ve been equipping for COVID-19, interviews IowaWatch and the Institute for Nonprofit News collaboration showed. On top of that, the Iowa Hospital Association says 17 Iowa hospitals were at financial risk more than a year before COVID-19.

Iowans are directed for testing for COVID-19, at the Iowa Department of Transportation test site in Cedar Rapids, Iowa, on Thursday, Aug. 20, 2020.
Lyle Muller
Iowans are directed for testing for COVID-19, at the Iowa Department of Transportation test site in Cedar Rapids, Iowa, on Thursday, Aug. 20, 2020.

“It doesn’t take much to strip the internal capacity of a rural hospital,” Mark Holmes, director of the Sheps Center for Health Services Research at the University of North Carolina, said in an IowaWatch interview in late August for that report. Nationally, 17 rural hospitals have closed this year and 132 have closed since 2010 because of financial problems, a database at his center shows.

Holmes said a lot of small rural hospitals operated with one ventilator or one respiratory therapist. But larger hospitals in Iowa have reported being stretched, too, financially and in terms of available health care professionals to treat patients. About 1 of every 4 health care workers at some Iowa hospitals missed a day of work because they had to deal with the disease in their personal lives, Norris said late last month. Iowa hospitals have 70,000 employees.

The arrival this week of a COVID-19 vaccine for health care workers at some state hospitals doesn’t mean immediate relief, hospital and state leaders said.

Kelly Garcia, interim director of the Iowa Department of Human Services, urged Iowans Wednesday to continue taking safety precautions as use of the vaccine spreads.

“To maintain significant progress on the vaccine front we have to keep up our fight around using simple public health measures: wash your hands, socially distance, stay at home if you’re sick and wear a mask,” Garcia said at a news conference called by Reynolds.

It was one of many news conferences Reynolds has held recently and at other times during the pandemic.“COVID-19 isn’t over simply because the vaccine is here, and beginning to be administered, but the finish line is finally in sight,” Reynolds said. “As I said early on, the pandemic would be a marathon and not a sprint, and we need to pace ourselves so we can endure it through the end. And, that still holds true today.”