Hospitals around the country have already lost billions of dollars since March due to the coronavirus pandemic, and the local hospital is no exception to the financial hit.
Johnson Memorial Health is operating at a significant financial loss for the rest of the year, but it is in no danger of going bankrupt, said Dr. David Dunkle, president and CEO of the health network.
“It’s tough to bounce back, but the good thing is, we’ve done a lot in the last few years to run more efficiently … the hospital has been a good steward with the money we have made in the last few years,” Dunkle said.
Although he would not offer specifics about the hospital’s finances, the Franklin hospital experienced financial losses from March to May, he said.
Between March and April, as the pandemic took hold, inpatient volume in Indiana fell 26%, according to Indiana Hospital Association (IHA) statistics. At Johnson Memorial, visits to the emergency room and to health network offices decreased by about 50%, Dunkle said. On top of that, hospitals across the state had to halt elective surgeries — the financial foundation for hospitals — for three months, he said.
Surgical stays account for roughly 48% of hospitalization costs around the country, the Agency for Healthcare Research and Quality reported in 2011.
“It’s very hard to go for three months without being able to offer services that are profitable to the hospital,” Dunkle said.
Indiana hospitals experienced a negative operating margin of -8.3% in April, according to the most recent data collected by IHA. And the American Hospital Association predicts U.S. hospitals will lose more than $320 billion this year.
In addition to losing regular revenue, hospitals’ spending on personal protective equipment increased significantly. Johnson Memorial went through about 600 masks a day in March and April, Dunkle has said.
“Our supply costs went up exponentially,” Dunkle said.
With an increase in demand for this equipment came an increase in price for masks, gloves and medical gowns. The prices inflated by 10 times their original price, or more, according to the IHA.
On average, hospitals lose almost $1,000 per admitted COVID-19 patient, Dunkle said.
“The average person I don’t think realizes how little money health care organizations the size of Johnson Memorial make, compared to regular businesses,” he said.
Hospitals have received $175 billion in federal relief money to combat the coronavirus pandemic so far, but IHA estimates that money only accounts for about 4% of hospitals’ typical annual net patient revenue. The U.S. Senate is working on an additional pandemic relief package with $25 billion planned to go to hospitals, less than the additional $100 billion the health care industry demanded.
The amount of money each hospital got was based on total net patient revenue. Large hospitals in areas defined as virus “hot spots” received more funding, and small rural hospitals with less money coming in from patients also received more, Dunkle said.
For Johnson Memorial, which is not as large as corporate health networks in Indianapolis and not as small as rural hospitals, it has gotten little federal relief money, Dunkle said.
And there isn’t anything Johnson Memorial can do about that, he said.
Johnson Memorial received $16 million total in federal relief funding, but almost all of that went to its 34 nursing home partners. The rest of the health network, including the main hospital, got about $1.5 million in relief, Dunkle said.
“We did not take care of enough patients to get that money,” Dunkle said. “We just didn’t get as much money proportionately as other hospitals here, which I look at as being a little unfair because we all treat COVID; COVID affected all of our operations.”
This financial hit also comes at the same time Johnson Memorial finished its $47 million expansion to the hospital’s Franklin campus. Fortunately, the hospital has already paid off most of the project, Dunkle said.
The hospital started elective surgeries again in May, and profits have been on an uptick ever since, Dunkle said. And because COVID-19 testing is more widely available, patients can be tested before any surgery, which makes going back to normal a lot easier, he said.
Emergency room visits are still low, which is likely due to people being afraid to come to the hospital during a pandemic, he said.
“People are putting off things because they think the hospitals aren’t safe. Unfortunately, this can result in a lot of people having heart attacks at home, or strokes at home,” Dunkle said. “Our hospitals are safe. Don’t delay care that you need.”
Dunkle is confident the hospital will be fine, financially, from here on out. But he isn’t sure how well it would weather another big hit, he said.
“We would definitely have trouble sustaining another closure of elective procedures without having to make some tough financial choices,” he said. “We’ll be fine, but we really can’t sustain another big hit.”
