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For hospitals, the coronavirus crisis extends deep into their finances

Massachusetts medical centers are projected to lose $5 billion in revenues through July.

Massachusetts General Hospital is among those large centers that are losing tens of millions of dollars in revenue each month.
Massachusetts General Hospital is among those large centers that are losing tens of millions of dollars in revenue each month.Stan Grossfeld/ Globe Staff

As the coronavirus pandemic begins to slowly abate in Massachusetts, hospitals are confronting the full breadth of the devastation it has wreaked on not only their patients, but their finances.

The state’s hospitals are currently losing $1.4 billion in revenue each month, according to the Massachusetts Health & Hospital Association, and are projected to lose $5 billion in revenue through July. For an industry that usually generates about $30 billion in gross revenue annually, this downturn — caused by the cancellation of elective surgeries and a drop in non-coronavirus visits — will almost certainly result in net losses for the year.

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Massachusetts health care providers already have furloughed thousands of employees, and they’re considering additional cuts as the crisis continues. Nationally, 1.4 million health care workers lost their jobs last month.

“The financial impact of COVID-19 is unlike anything that we’ve ever seen,” said Dr. Kevin Tabb, chief executive of Beth Israel Lahey Health, the state’s second-largest hospital network.

Beth Israel Lahey has furloughed more than 9 percent of its workforce, following similar moves at other providers, including Boston Medical Center, Tufts Medical Center, and Atrius Health.

He and other hospital leaders said their revenue and patient numbers have plunged to less than half of what they were before the pandemic. “That’s a staggering number,” Tabb said.

And though Beth Israel Lahey Health initially received more than $100 million from the federal coronavirus relief package, that covers just two weeks of losses.

The financial woes may seem counterintuitive for institutions that have been swamped with coronavirus patients in recent months, but the work of responding to the pandemic has been expensive. To manage the surge, they retrained and reassigned staff, purchased more protective gear and testing equipment, and erected clinics and field hospitals. And, critically, they emptied hospital beds and clinics of all patients except those with the most pressing needs — resulting in a major hit to their revenues.

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Indeed, many of the procedures hospitals postponed, such as joint replacement surgeries, are among their most lucrative services.

Meanwhile, doctors worry that people have been avoiding hospitals even for emergencies and urgent concerns such as strokes, heart attacks, and cancer evaluations, for fear of being exposed to the coronavirus.

Hospitals were profitable a year ago, but this March their operating margins plunged rapidly into the red, according to data from more than 800 US hospitals analyzed by the consulting firm Kaufman Hall. And that was just the beginning of a long slide, analysts warned.

Nearly every industry is now struggling, but the challenge for health care providers is unique. “At the same time hospitals are saving lives, they’re losing significant amounts of money,” said Jim Blake, managing director at Kaufman Hall.

It’s a difficult time for hospitals to slash jobs, given their role in battling the coronavirus. But they may not be able to avoid such cuts, Blake said.

Their fortunes are tied to the fate of the virus and how well it can be controlled through testing, treatment, and ultimately, a vaccine.

There is the fear of a second wave of illness in the fall and winter, which could mean hospitals ramp up their normal operations only to cut back again a few months later.

Executives at Partners HealthCare have mapped out scenarios that have their hospitals returning to a more normal level of operations as soon as this summer or as late as the summer of 2021. They don’t know which is more likely.

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And when hospitals are ready to bring back patients whose appointments and procedures were canceled, will patients show up — or will they keep delaying trips to the hospital?

“How is the public going to react to coming back to the hospitals?” said Peter Markell, chief financial officer at Partners. “We’ve got to convince them that it is safe, and they should get that care.”

Partners’ revenue has fallen by as much as $350 million a month, even as its hospitals, which include Massachusetts General and Brigham and Women’s, are treating hundreds of patients with COVID-19.

The health system may delay big projects, Markell acknowledged, such as a splashy rebranding campaign (Partners is changing its name to Mass General Brigham) and the construction of new surgery centers.

"We've got to build the cash back up before we can undertake those projects," Markell said. "If we can't get out of this quickly, and there's significant losses, we're going to have to hold for a while."

As the state’s largest health system, Partners is better positioned than most to ride out the pandemic, and so far, the company has not furloughed large numbers of workers.

Small and rural health care providers, meanwhile, are expected to suffer more. Some providers may try to survive by joining larger organizations — and these mergers could drive up costs, Harvard economist David M. Cutler and his colleagues wrote in the Journal of the American Medical Association this month.

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Steve Walsh, president of the Massachusetts Health & Hospital Association, said hospital leaders don’t know how they will recover from the crisis.

“You can’t double the number of procedures in the future,” he said. “There’s never an opportunity to catch up. It will be years to recover from a complete stoppage of elective and scheduled events by our caregivers.”

Local hospital leaders said they’re still tallying up the new costs they’ve had to incur to fight the virus and don’t know if and how they will be reimbursed.

In Massachusetts, UMass Memorial Health Care spent an estimated $10 million to establish a field hospital at a Worcester convention center, while Partners spent $12 million to $14 million to build the temporary hospital at the Boston Convention and Exhibition Center.

The American Hospital Association projects that hospitals nationwide will have a net loss of $202.6 billion in the four-month period from March through June this year, due largely to a $161.4 billion drop in revenue from patient visits and procedures that were canceled. Meanwhile, US hospitals are now spending $600 million a month on personal protective equipment and other supplies, the association said.

Massachusetts hospitals have received about $1 billion from the federal CARES Act. But industry leaders say what sounds like a large sum won’t cover hospitals’ ongoing losses, and they are lobbying for more.

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Labor unions are watching closely as hospitals navigate the financial setback.

Officials at the Massachusetts Nurses Association said they’re worried that hospitals focused on their finances may reopen for normal business too quickly or reduce staff if losses persist. “To reopen services safely will require more staff, not less,” union spokesman David Schildmeier said.

Tim Foley, executive vice president of 1199SEIU United Healthcare Workers East, said he’s particularly concerned about how community and safety-net hospitals will manage the long-term effects of the pandemic. About 900 of the union’s Massachusetts members have been furloughed.

“We always have that concern that the furloughed workers can become permanent [layoffs], but we’re hopeful that all health care workers do come back to work,” Foley said. “We know before this pandemic there were great health care needs. We believe after the pandemic we should get back to the same level of care.”

Even as the number of patients seriously ill with COVID-19 starts to dip, about 3,100 in Massachusetts remain hospitalized, many of them needing weeks in intensive care. Hospital leaders have much to consider besides finances.

“When I talk to my fellow CEOs around town, we’re not talking about our income statements,” said Kate Walsh, chief executive of Boston Medical Center. “We’re talking about just how hard our teams are working, what it’s like to do a 12-hour shift in an ICU wearing full personal protective equipment, what it’s like to have employees test positive and not be able to go home to their families."

BMC, a safety net hospital that treats large numbers of poor and homeless patients, has furloughed 10 percent of its workforce. It lost $20 million in revenue in the last two weeks of March and is on track to lose another $100 million through April and May. Hospital leaders are modeling when and how to bring back medical services that have been on hold.

“I’m sure that in a few weeks or months as the COVID volume recedes, we’ll be very focused on the finances,” Walsh said, “but right now, we’re really just dialed in to getting our organizations through this.”

This story has been updated to reflect new information about furloughs at Beth Israel Lahey Health.


Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.