Alaska hospitals fear long-term consequences of COVID-19 financial impact

A triage tent is set up to screen patients for symptoms of COVID-19 outside on Monday, April 7, 2020 at Bartlett Hospital in Juneau, Alaska. Hospitals statewide have been making changes to both their operations and financial management in response to the pandemic. (Photo by Rashah McChesney/KTOO)

Alaska hospitals have been crucial to the state’s economy, driving employment even as other industries have gone up and down. But they’re among the businesses that have seen steep drops in revenue during the COVID-19 pandemic. And while federal aid has been crucial, it hasn’t made up for their losses. 

One hospital that has had a particularly challenging time is Fairbanks Memorial Hospital. 

In addition to dealing with the loss of revenue from elective surgeries, which hit all hospitals hard, Fairbanks Memorial has had the added cost of providing public health services, like campaigns to inform the public about COVID-19. In places like Anchorage, the local government pays for that. In Fairbanks, the hospital is responsible. 

Shelley Ebenal is the CEO of the hospital’s parent organization, Foundation Health Partners. 

“We’ve been taking on more than just health care, but public health also for our community, which isn’t inexpensive,” she said.

The hospital took a series of steps to keep down costs: It stopped pay increases based on merit and cut executive compensation; stopped adding new workers to its tuition payment program; cancelled construction projects; held off on buying equipment; limited overtime; and encouraged time off without pay. Despite all of this, it’s still had to lay off some workers.

Through the end of May, it had racked up an estimated $24 million in losses. CARES Act relief was only able to offset the $6 million it lost in March.

Ebenal said the lack of federal aid seems to be the result of the hospital missing out on funding for rural providers, despite serving a largely rural area. 

“We seem to be in that place where we’re too big to be small and too small to be big,” Ebenal said. “We just seem to get left out.”

The hospital has had to repeatedly redeploy its staff, in some cases leading to highly skilled nurses doing work that doesn’t require their skills, like screening patients. 

Ebenal credited the hospital staff with essentially knocking down the growth of the virus in the community, to the point where Fairbanks hasn’t had a confirmed case with an onset date after early May.

Ebenal added that the hospital has both health care and economic responsibilities in the community. 

“The last thing we want to do is have major layoffs, just because we are the largest private employer in Fairbanks,” she said. “So we know we have a huge impact on the economy here.”

Hospitals leaders say more federal aid will be essential, as will increasing the capacity for testing for the virus. 

Hospital staff say turning around coronavirus tests has been a challenge. A rapid testing machine originally scheduled for delivery in mid-June has been delayed a month. Once it arrives, the hospital hopes to meet the local testing need. 

A nearly empty critical care unit at Bartlett Hospital on April 7, 2020, in Juneau. (Photo by Rashah McChesney/KTOO)

Jared Kosin, president and CEO of the Alaska State Hospital and Nursing Home Association, said hospitals statewide sat half-full beginning in March.

“And you just saw surgeries end overnight,” Kosin said. “You saw outpatient services and rehab and other things like that end overnight. And then inpatient services have plummeted as well, presumably because people are trying to stay away.”

The CARES Act has helped. Through mid-May there had been two major disbursements: $85 million to Alaska providers based on how many Medicaid patients they served in the past — with just over half of the money going to hospitals — and roughly $70 million to rural Alaska providers, two thirds of that going to hospitals. More CARES Act aid from local and state government is expected.

Kosin has been advocating for the state to establish a process for what it will do if a hospital runs out of money. 

“My biggest concern is, what if one of our facilities becomes insolvent and drops out?” he said.

Kosin also said that while he understands the financial pressure the state government is under, it’s important that it not cut Medicaid reimbursement rates to health care providers. 

Kosin said the pandemic has forced hospitals to find new ways to cuts costs while still delivering care. He fears the long-term consequences on Alaska’s economy and Alaskan lives.

“So, if you think about this as an experiment, how this is going to turn out is, I think, going to be pretty fascinating. But I think there’s going to be a lot of carnage kind of left behind,” he said.

Like a lot of hospitals, Alaska Regional Hospital in Anchorage relies on the money it receives from elective surgeries. 

But as CEO Julie Taylor said, the hospital still had to carry the costs of operating even when it wasn’t receiving any income from surgeries. 

“It really wreaks havoc with your bottom line,” Taylor said.

Through mid-May, the number of the patients in hospital was down 60 percent from before the pandemic. And while the hospital restarted elective surgeries, it’s not performing as many. Some patients have been hesitant to go to the same buildings where COVID-19 patients have been. 

Taylor wants to reassure patients that the hospital is safe. 

“We live infection prevention all of the time,” she said. “And that just means under these conditions, we’re doubling down on our efforts.”

Taylor said delaying important procedures will harm patients’ health. And she hopes it doesn’t take knowing someone who was hurt by delaying a procedure to convince more people to schedule operations. 

Taylor’s concerned that lasting economic damage will mean fewer patients with private health insurance. And it’s private insurance that offsets the lower rates that Medicare and Medicaid pay. 

Alaska Regional  benefited from federal CARES Act relief, too. But it wasn’t enough to cover  the hospital’s losses. Taylor hopes policymakers use this crisis to understand what’s necessary to keep Alaska’s hospitals financially strong.

“I really think this is a really good exercise for everybody to look at, to see what is the impact to have a strong health care system — one that you can rely on, which we do — and how do we sustain that long into the future, because lives do depend on it,” she said.

The total economic impact of the pandemic on Alaska’s hospitals is still emerging.

University of Alaska Anchorage economist Mouhcine Guettabi said health care was one of the only bright spots in Alaska’s economy during the three-year recession that the state was emerging from when COVID-19 hit. 

Economic data shows personal health care spending in Alaska was down 60 percent from January to May. And Guettabi said that’s a big deal. Roughly 22 percent of all personal spending in the state goes toward health care. 

“Once you remove that chunk of money out of the economy, we’re talking about a significant chunk of money that’s just no longer being spent,” he said.

Guettabi said whether unemployment stays high will determine how many workers lose private insurance. That will make a big difference, because Alaska’s high health care costs mean paying for procedures out of pocket can be prohibitive. 

“The fate of the health care industry is really going to rest on, how comfortable are Alaskans about getting procedures done, about going and getting nonessential visits — or non-urgent visits — and how quickly does that transition happen?” he said.

When the state opened elective surgeries back up, patients could only receive care if they tested negative for COVID-19 within 48 hours. Earlier this week, the state extended that window up to 72 hours, which could help rural hospitals start booking more revenue-generating surgeries.  

 

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