Northfield Hospital and Clinics announced Wednesday that senior staff and directors are taking a 10% pay cut and that some staff will be placed on temporary leaves of absence to manage financial losses brought by COVID-19 preparation.
The announcement is a sign of the financial impact the pandemic is inflicting on hospitals across the country.
In a conference call Wednesday afternoon, Minnesota Hospital Association President and CEO Rahul Koranne said hospitals around the state are in a “dire financial crisis.” Earlier this week, the Minnesota Hospital Association announced hospitals in that state are losing about $31 million per day because of lost revenue from eliminating elective surgeries, to focus capacity and supplies on COVID-19 response. This data is tracked by MHA.
City-owned NH+C is reportedly losing $1 million per week between lost revenue and costs of COVID-19 response.
Money to cover Northfield’s financial losses comes from reserves Northfield Hospital and Clinics has built over decades. The hospital system says the leaves of absence, which start Sunday, will impact “a range of positions across departments. The number and details are being worked out directly with staff.”
The changes are expected to be re-evaluated at the end of May.
“Like many other medical centers, we are committed to the mission of protecting our community, but at the same time we need to be mindful of the financial realities,” said hospital system CEO Steve Underdahl. “I am heartsick to take this action at a moment when NH+C’s team has made heroic efforts to get us ready for the COVID-19 impact. It is our intention to call people back to work as soon as possible.”
“We’re confident that the scope and quality of our services will continue to meet our high clinical standards,” he added. “It’s our intention that these steps are temporary and although painful, these actions will help us protect the financial health of NH+C as we continue to care for the community.”
Northfield Hospital and Clinics is reportedly working with state and federal government officials to prioritize COVID-19 relief funding for hospitals and health care workers.
The announcement came the same day Gov. Tim Walz extended the state’s stay-at-home order through May 4.
Department of Health awards emergency grants
The Minnesota Department of Health awarded $150 million in emergency health care grants Wednesday to nearly 350 provider organizations across the state to prepare and respond to the pandemic, and will soon take applications for an additional $150 million the Legislature approved as part of a new health care response fund to help providers prepare for and respond to the outbreak.
The Hospital Association’s Koranne said hospitals and health care systems across the state are looking to expand space to allow for more critical care beds. Even with that, he expects they will need even more capacity beyond that if a substantial surge happens.
The following day, Minnesota hospitals and health systems requested additional federal funding for an estimated $2.9 billion loss over the next 90 days due to responding to COVID-19.
Koranne said in a press release, “significant federal funding is required to ensure Minnesota health care providers are able to provide necessary services to get hospitals and health systems through this pandemic and to ensure continued viability and access to health care throughout the state once the pandemic is resolved.”
MHA worked with accounting firm CliftonLarsonAllen to model the near-term impact of the pandemic.
“Minnesota’s health care providers have postponed elective surgeries and reduced in-person visits to clinics in order to conserve personal protective equipment (PPE) for front-line caregivers and to reduce potential exposure for both health care workers and patients,” Koranne said in the release. “That was the right thing to do, but the reduction in revenue and significant costs to acquire an unprecedented amount of supplies and equipment, build out temporary spaces for a surge of patients and ensure we will have the right workforce in place to care for COVID-19 patients — particularly in intensive care — are having a significant financial impact on health systems throughout Minnesota, large and small, metro and rural.”
The revenue loss represents a 55% reduction of patient revenue, on average. Smaller hospitals are reporting closer to 70% revenue reductions. The loss is expected to remain consistent over the next 90 days for a $2.8 billion impact.
The release states MHA members are spending approximately $13.3 million per day to purchase equipment and supplies and to make physical and technological upgrades that will allow them to handle a surge of COVID-19 patients. Over 90 days, those additional expenses are expected to total $1.2 billion.
“The analysis also accounted for offsetting revenues as COVID-19 cases increase,” the release states. “With an estimated shortfall from reimbursements, hospitals and health systems will experience over $120 million in uncovered patient-related costs. In total, this will result in approximately a $2.9 billion cash flow loss over the next 90 days.”
On Wednesday, Koranne spoke highly of the work Minnesota’s hospitals and health care workers are undertaking to help prevent COVID-19 deaths. He said the Hospital Association supports Walz’s stay-at-home order because it is giving health care systems precious time to prepare for an expected influx of patients.
Koranne said state health officials are gleaning lessons from the significant outbreak New York is facing and are evaluating models to prepare for any influx, and working with the state Legislature and congressional delegation for additional funding.
He addressed concerns over the possible health impact of the decisions of neighboring states North Dakota and Iowa to hold off on issuing strict stay-at-home orders.
“Science is the science, and the science needs to be for everybody,” Koranne said. “We definitely hope that everybody will be led by science and evidence.”