Hospitals received hundreds of millions in stimulus -- so why all the layoffs?

Almost half claimed by two local health systems
Posted at 5:00 AM, Jul 22, 2020
and last updated 2020-07-22 18:28:32-04

CINCINNATI — When the pandemic hit, Nicole Jones thought she was headed for the unemployment line. Her bosses at St. Elizabeth Healthcare had another idea.

They offered to pay her full salary as a certified athletic trainer at Conner High School if she took on other roles in the hospital system. Jones spent several weeks checking the temperature of hospital visitors and employees, monitoring inventory and cleaning doors, windows and surfaces to guard against coronavirus.

“It was a huge relief,” said Jones, a 2011 graduate of Xavier University. It was a “weight off of our shoulders just knowing that the hospital had a plan for us.”

Nicole Jones, returned to Conner High's athletic fields July 1.

St. E wasn’t immune to the economic damage caused by COVID-9. CEO Garren Colvin estimates the hospital system will lose about $125 million before it’s all said and done. But St. E had three things going for it when the shutdowns began: A healthy balance sheet, a less severe outbreak in Northern Kentucky compared to other parts of the country and $150 million in federal stimulus awards.

St. E ranked second among Cincinnati’s six major hospital systems in the amount of emergency funding it received through the CARES Act, an I-Team analysis shows.

It received $98 million in advance payments from Medicare, effectively a loan that must be repaid with reduced reimbursements in the next 12 months. And it won $52 million in grants through the CARES Act Provider Relief Fund, which aims to contribute $175 billion to hospitals and other healthcare providers nationwide.

“The stimulus has been a game changer on a lot of fronts,” Colvin said. “We knew through the advance payments and through our historical performance that we were going to have the financial sustainability to make it through the crisis.”

The I-Team has been tracking the local impact of the $2 trillion CARES Act by tracing how much money is finding its way into local unemployment checks, small-business loans and payments to hospital systems like St. Elizabeth.

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Our analysis shows Greater Cincinnati’s six major hospital systems have received $689 million so far, 70% of it from Medicare’s advance payment program and 30% from Provider Relief grants. Those six hospital networks employ a combined 63,000 people. The federal aid would be enough to write each of them a check for $10,000.

But hospitals aren’t required to spend the money to save jobs. And many of them didn’t, based on local and national unemployment statistics.

The Kaiser Family Foundation estimated hospitals nationwide shed 122,000 jobs from February to April, a trend that continued into May.

Numbers from the Ohio Department of Job and Family Services show the healthcare and social assistance sector, which includes hospitals, was responsible for more unemployment claims in Southwest Ohio in April and May than any other employment segment, including hotels, restaurants and retail trade.

"The money that went to healthcare providers really didn't have a lot of strings attached,” said Karyn Schwartz, a health policy expert with the Kaiser Family Foundation, a San Francisco nonprofit that publishes research and analysis on the health care industry. "Hospitals were free to make decisions around layoffs even if they accepted the money."

Medicare’s public statement on its Accelerated and Advance Payments Program says the purpose of the funding is “to increase cash flow to providers of services and suppliers impacted by the 2019 Novel Coronavirus (COVID-19) pandemic.” The U.S. Department of Health and Human Services says its Provider Relief Fund grants must be used “to prevent, prepare for, and respond to coronavirus” and “replace any revenue that you as a healthcare provider lost due to coronavirus.”

St. E was rare among local hospital systems in that it avoided layoffs, furloughs and pay cuts throughout the COVID-19 crisis. Colvin said some employees opted for unemployment instead of taking reassignments, but no one was forced out of a job or required to take lesser pay. Physicians were guaranteed to receive at least 90% of their pre-pandemic pay, even as offices closed to comply with government shutdowns, he added.

But Colvin didn’t want to comment on cost-cutting by his Ohio rivals, partly because coronavirus case rates in Northern Kentucky never surged to the levels reached in Hamilton County. That enabled St. E to replace lost revenue earlier from elective surgeries and physician office visits.

“I don’t think it’s fair to the Cincinnati hospitals to ask, ‘Why can a Kentucky hospital do it if the Cincinnati hospitals couldn’t?’” said Colvin. “We made the right decision for St. Elizabeth, but I don’t think Cincinnati hospitals should be looked at negatively. They did absolutely the right thing across the board.”

The I-Team requested CEO interviews from all five Southwest Ohio hospital systems. All declined or did not respond. But each system provided statements for this report that partially answered our questions.

Here's what we learned

The region’s total haul from hospital stimulus will likely climb higher than $700 million. That’s because the Provider Relief Program has yet to award about $60 billion in stimulus grants, said Schwartz, who has been following grant awards since the program’s inception.

UC Health said its total proceeds from Provider Relief grants are approximately $36 million, which is more than the $32.4 million the I-Team was able to find in federal records. Another system, Mercy Health, also reported a higher stimulus amount than the I-Team found in federal records. Mercy Health said it received $24.6 million more than the I-Team's estimate for its Medicare advance payments. That means its total stimulus award could be above $153 million.

“There are a few quirks with that data,” she said. “More money has been given out than is accounted for” in the public disclosures to date.

Beyond those discrepancies, local hospitals could pursue additional funding from the Federal Emergency Management Administration – which is setting up an application process to cover 75% of the cost of emergency medical facilities under a March 13 executive order in which President Donald Trump declared the coronavirus a national emergency.

“Everything that all these hospitals did was to prepare for a worst-case scenario,” Colvin said. “So, for Cincinnati hospitals, building out the convention center. For us, we looked at building out BB&T (Arena as a makeshift hospital). We’ll apply for a refund from FEMA on all those dollars.”

As for stimulus awards already banked, there are several indications that it won’t be enough. The American Hospital Association estimated June 30 that hospitals and health systems will lose $323 billion this year, due to lost revenue and increased expenses from coronavirus.

The I-Team’s comparison of stimulus awards to hospital financial data shows 15 local hospitals received enough money to cover at least 12 weeks of payroll. But most hospitals did not get enough to cover more than 15% of annual patient revenue and/or annual operating expenses. In other words, hospitals will be hard pressed to solve all financial woes – particularly if they have to pay back the Medicare advances that accounted for 70% of local stimulus proceeds.

The I-Team's hospital analysis was based on Medicare cost report data from each hospital's 2018 fiscal year, which we downloaded from the RAND Hospital Data Tool. The stimulus data came from two sources: A searchable database of Provider Relief grants offered by the Centers for Disease Control and a download of Medicare's Accelerated and Advance Payments data from the Center for Medicare & Medicaid Services.

In addition to the hospital analysis, the I-Team compared stimulus awards to hospital systems. That included grants and Medicare advances not only to hospitals but also hospital-owned physician groups, home health care companies and skilled nursing facilities.

We wanted to see if stimulus awards reduced the pressure on hospital systems to engage in aggressive cost cutting. The answer is, probably not.

Comparing the systems

UC Health received $169 million in stimulus proceeds – more than any other local health system. But a spokeswoman confirmed UC Health also cut overall labor expenses by at least 20% in non-clinical departments by requiring paid time off and unpaid leave for an undisclosed number of employees. All director-level employees and above received pay cuts of 15 to 30 percent. Dr. Richard Lofgren, the health system’s CEO, took a 30% pay cut worth about $529,000 – based on a tax return filed last June that disclosed Lofgren’s compensation at $1.77 million.

“The federal aid we have received, along with the aggressive cost-containment steps we have taken, helped us recover a portion of our financial loss,” said Kelly Martin, UC Health spokeswoman. “Unfortunately, we continue to see an increase in COVID-19 cases and our expenses continue to rise with extensive PPE, lab and other COVID related costs.”

Cincinnati Children’s Hospital Medical Center ranked last among local hospital systems with its $42 million Provider Relief grant. It wasn’t eligible for advance payments from Medicare because, as a Children’s hospital, it doesn’t treat many Medicare patients.

“We estimate the CARES payment covered less than a third of our lost revenue through April,” spokeswoman Libby Coulter said, in an email response to the I-Team’s questions. “We continue to lose revenue, which means at this juncture, the CARES funding covers even less of our losses.”

Children’s has re-opened four of the five locations it closed as a cost-cutting measure in March and April. As of July 6, only the Mason Urgent Care Center remained closed. Coulter said the hospital eliminated merit raises for the fiscal year that began July 1 and froze hiring. It also announced temporary pay cuts for CEO Michael Fisher and his leadership team but declined to provide details on the cuts.

I-Team tally for Mercy Health - Cincinnati: $128.7 million

Mercy Health also declined to reveal details on pay cuts for top executives, but spokeswoman Nanette Bentley said via email that reductions could be coming for top executives of Bon Secours Mercy Health, Mercy’s parent company.

“Executive pay is largely performance-based, meaning that any incentives or salary changes are largely tied to ministry performance and financial results,” Bentley wrote. “As such, executives have a much greater portion of their pay that is dependent on ministry success. The impact of COVID-19 will be felt most significantly by our executives long-term.”

Bentley also provided an update on the hospital chain’s previously announced furlough program. Initially, it said 700 employees would be furloughed for 30 to 90 days. But that number reached 3,000 by the time the furloughs ended June 30. Workers impacted by the cuts were able to apply for financial aid through a $60 million fund established by the hospital chain. Bentley declined to provide details on how many employees were served by the fund.

“The $60M Associate Hardship Fund has assisted associates throughout the pandemic, helping with child and elder care expenses, and providing restorative pay to furloughed associates and those on reduced hours due to the suspension of elective procedures and non-COVID-related services,” she said.

Trihealth did not answer any of the I-Team’s questions but provided a statement that CEO Mark Clement sent to employees in June. It announced the elimination of 440 jobs, including 150 positions that were already vacant. Trihealth is the only local health system to announce permanent cuts so far.

Clement told employees that the hospital system lost nearly $100 million from March to May and expected to lose in excess of $10 million a month if no cuts were made. In addition to job reductions, Clement announced plans to close more than 20 Trihealth Physician Partners locations by consolidating them into larger medical offices.

“It is clear we will be facing a slow recovery and prolonged period of reduced volume and revenue, which we expect to be between 90–95% of pre-pandemic levels,” Clement wrote. “This reality requires us to ACT NOW to avoid continued operating losses.”

Trihealth ranked fifth in the I-Team’s analysis, with $88.6 million in total stimulus awards, 62% of it from Medicare advances.

Christ Hospital Health Network received $110.4 million in total stimulus awards, nearly all of it flowing to its Mt. Auburn headquarters hospital. The system did not respond to the I-Team’s request for information but has previously announced 25% pay cuts for top executives and employees who weren’t working due to hospital closures.

A June 8 Tweet signaled that the hospital had re-opened “elective services and procedures,” including sleep studies, mammograms, cardiac rehab, physical therapy and screenings for lung and vascular problems. On July, the hospital Tweeted that its Liberty Township birthing center had re-opened.

On the agenda

Going forward, hospitals are likely to push for more stimulus. Cincinnati Children’s, for example, is part of a national lobbying effort to send the $60 billion in unspent Provider Relief grants to children’s hospitals nationwide.

“The majority of federal stimulus dollars allocated to date have been Medicare driven,” wrote Elizabeth Coulter, senior director of external relations, in an email to the I-Team. “This has led to the nation’s children’s hospitals receiving less than 1% of CARES Act dollars distributed so far.”

Even hospitals that did well in the Medicare-driven awards process are pushing to improve their terms and conditions, either by seeking new stimulus awards or friendlier repayment terms on the Medicare advances they’ve already received.

“Congress is going to be working on a new coronavirus package when the Senate reconvenes,” Schwartz said. “Given that we see hospitals under a lot of stress right now, dealing with coronavirus. As cases flare up there’s more of a need to decrease elective procedures (again). So, I think it’s certainly something that will be on the agenda.”

Nicole Jones, back to work

But Nicole Jones has her own agenda these days: looking after the fitness needs of 700 student athletes on Conner High’s Hebron campus. She’s happy to be back to her regular job without the financial baggage that would have come from spending several weeks on furlough.

"I know a lot of athletic trainers around the country, and a lot of them, they furloughed,” she said. "So, again, grateful that (I'm) working for a hospital system that kept me whole."

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