Small hospitals weather the pandemic, but with heavy losses

MONROE — Five months into a pandemic that public health officials say could last many more, small local hospitals are shoring up their losses after the onset of the new coronavirus crisis curtailed operations and curbed revenue.

The pandemic has cost EvergreenHealth Monroe, Skagit Regional Health’s Cascade Valley Hospital in Arlington, and WhidbeyHealth Medical Center in Coupeville millions of dollars each, officials say. The disaster has burdened them with extra expenses — such as protective equipment and additional staffing — while temporarily halting the surgeries and procedures that are among their biggest moneymakers.

The providers say they expect to stay afloat, citing returning patients and rebounding revenue as the state begins to reopen.

But hospital officials are weary. Another wave of cases could cause Gov. Jay Inslee to redouble restrictions, throwing budget projections into chaos and forcing the institutions to weigh cuts to programs and services that residents in some small cities and rural areas rely on.

“A lot of this depends on what the future holds — how long this is going to go on for — it’s just so unknown right now,” said John Green, chief financial officer of EvergreenHealth Monroe. “If revenues ultimately don’t pick up, we would anticipate difficult decisions. But right now we don’t foresee that happening.”

The federal CARES Act has offered many small hospitals a way to recoup a fraction of their costs and bolster their shoestring budgets.

For deep-pocketed hospital chains, though, the same set of federal relief programs has become a windfall.

Providence Health System, which includes Everett’s hospital and many more, has received more than $500 million in CARES Act funding.

Meanwhile, WhidbeyHealth has received $7.2 million in federal stimulus funding to date. The provider faced more than $2.6 million in unexpected costs due to the pandemic and lost more in patient revenues.

“We get the crumbs and Providence got not only the loaf, but they got the bread truck,” Ron Wallin, president of WhidbeyHealth’s Board of Commissioners, said at the board’s July 8 meeting.

Providence is one of the nation’s biggest and wealthiest hospital chains, according to The New York Times, which first reported the inequities in relief funding in May.

The system, which encompasses 51 hospitals in eight states, lost $276 million during the first quarter of this year due to the demands that COVID-19 imposed, according to a statement on its website. In just April, losses totaled $179 million — even with support from the CARES Act, the website says.

Providence Regional Medical Center Everett treated the first known COVID-19 patient in the country and has been battling the public health crisis for longer than many other hospitals in the United States, noted Casey Calamusa, communication director for Providence Health & Services in northwest Washington. The Everett hospital has cared for nearly 500 coronavirus patients.

Calamusa said he would not characterize the relief funding as a windfall for the Providence system, citing the hundreds of millions of dollars in losses that the hospital chain has suffered due to the pandemic.

EvergreenHealth Monroe has gotten more than $5 million in all from the CARES Act. Six months into 2020, the hospital’s revenue was down by $5 million — nearly one-fifth of its projected earnings for the first half of the year. As of the end of June, it had about 50 days of cash on hand.

“Thirty or 40 days cash on hand doesn’t leave you positioned well enough in case an emergency like a pandemic comes along,” said Green.

Skagit Regional Health saw an $11 million net income loss during the first half of the year, even after accounting for the $7.6 million it received from the federal relief package.

“There is still a significant shortfall,” said Danny Vera, regional vice president and chief operating officer for Skagit Regional Health. “By no means does that funding cover or make up the losses we saw during the most devastating months.”

Washington hospitals were hardest hit in March, April and May, when Inslee halted elective surgeries and dental services in a bid to save key equipment for COVID-19 health care workers. Inslee gave the green light for many of those services to resume in mid-May.

For EvergreenHealth Monroe, the governor’s order meant shuttering a 40-bed substance abuse treatment program, too.

The Monroe hospital has another 27 beds for acute inpatient services and a strong orthopedic surgery program.

Its reach extends to rural areas such as Sultan and Gold Bar, offering residents a lifeline.

“Evergreen is extremely important to east Snohomish County. We need a safe, reliable hospital in east Snohomish County that residents can put their support and trust in,” said County Councilman Sam Low, whose district includes the Monroe hospital. “The closer you are to a hospital, the better results that you can have.”

Even before the pandemic, nearly half of the country’s rural hospitals were operating in the red, according to a report by The Chartis Center for Rural Health, a consulting firm.

Many smaller facilities, such as Cascade Valley Hospital in Arlington, predominantly serve patients who are covered by Medicaid or Medicare. But reimbursements from those government programs often fall short of the cost of care, so hospitals rely on compensation from commercial insurers to make up the difference, Skagit Regional Health’s Vera said.

Skagit Regional Health initially furloughed between 250 and 300 staff to cut costs. It also put off projects and instituted salary reductions and mandatory time off for its leadership team.

In March, the Washington State Hospital Association pleaded for financial relief for small hospitals in a letter to the governor. More than a dozen rural hospitals had indicated they had less than 45 days of cash on hand. Five facilities — WhidbeyHealth’s medical center and other hospitals in Dayton, Aberdeen, Omak and Brewster — were “facing imminent closure,” according to the letter.

As of early July, WhidbeyHealth’s net patient revenue was down about 14%, from $43.5 million in 2019, according to a presentation by the system’s finance director, Jennifer Reed, at a recent commissioners meeting.

Nearly 100 staffers were initially furloughed to reduce expenses. As of the early July meeting, 65 people had returned to work, 24 had chosen not to return or had retired, and about a dozen more were awaiting a final decision.

WhidbeyHealth has made a comeback, though, said Nic Wildeman, the director of community relations.

“I would say that our situation is not dire. Our Board of Commissioners are absolutely committed to WhidbeyHealth being on the island in the long run,” Wildeman said. “We’re ramping back up and getting closer and closer to normal.”

“Like the rest of the country, we’re sort of holding our breath to see what happens with another surge later on this year,” he said.

Rachel Riley: 425-339-3465; rriley@heraldnet.com. Twitter: @rachel_m_riley.