The state’s largest hospital network on Friday detailed the initial toll the coronavirus pandemic has taken on its finances. The prognosis: The pain may last for months.
Partners HealthCare, the parent of Massachusetts General and Brigham and Women’s hospitals, reported an operating loss of $178 million in the fiscal second quarter that ended March 31, before the COVID-19 crisis reached its peak. The loss, its first since the fourth quarter of fiscal 2017, compared with an operating profit of $107 million in the year-earlier period. Revenue was little unchanged at $3.43 billion as expenses climbed 9.5 percent.
The company, which is rebranding under the Mass General Brigham name, said in a statement that based on results from March and April, it expects to lose $400 million a month in patient service revenue, which accounted for nearly two-thirds of all revenue in the first half of the fiscal year. How long the revenue losses continue depends on when it can resume elective medical procedures and outpatient care, when and whether demand for services returns to normal, and other factors, Partners said.
“Like everyone, we are waiting to see what the governor says Monday,” said Peter Markell, Partners’ chief financial officer, referring to the expectation that Governor Charlie Baker will lay out his road map for getting the economy going again, and not extend the state’s restrictions on nonessential businesses and stay-at-home advisory, now set to expire on Tuesday.
“We’ll see what we can start doing that we couldn’t do before,” he said in an interview.
The state’s hospitals are losing $1.4 billion in revenue each month, the Massachusetts Health & Hospital Association told the Globe earlier this month, and are projected to lose $5 billion in revenue through July. The health and human services providers jettisoned more than 100,000 jobs in the past eight weeks, or more than 15 percent of the labor force, as most elective and outpatient care was curtailed.
Markell said Partners, the state’s largest private employer, had not laid off or furloughed any of its 78,000 workers, and has told them their jobs are secure at least through June.
Separately, three of the state’s four top nonprofit health insurers — Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim Health Plan, and Tufts Health Plan — reported operating losses in their first quarter that ended in March, while Fallon Health posted a drop in operating profit. All the companies said the impact from COVID-19 on their finances was limited to the tail end of March.
“There was some impact in claims volume and premiums, but not what we anticipate going forward,” said Michael Carson, chief executive of Harvard Pilgrim.
The insurers are bracing for increases in claims, as people who put off getting care during the pandemic return to their doctors, as well as declines in revenue, as laid-off workers lose coverage and employers struggle to pay premiums.
“We’re waiting to understand the full picture for the second quarter,” said Andreana Santangelo, chief financial officer at Blue Cross Blue Shield, the state’s biggest health insurer. “The full year is quite unknown and will be extremely volatile.”
The insurers’ first-quarter profits were affected by hefty assessments under the Affordable Care Act. The payments, which are annual but were waived in 2019, are used to finance policy subsidies and expand coverage.
At Blue Cross Blue Shield, the ACA assessment came to $101 million. At Harvard Pilgrim it was $34 million.
The resumption of non-COVID care is expected to be a slow and gradual process.
Partners is hoping to get patient services revenue back to normal levels sometime between the end of September and the end of the year.
“The wild card is how are the patients going to respond to coming back," he said. "We don’t know.”
At the same time, Partners and the rest of the state’s health care industry must plan for flareups in COVID-19 cases.
Markell said Partners decided in March to reduce capital expenditures by $550 million, or about half of the planned spending for the year. It has also frozen administrative hiring and taken on short-term debt to give it more financial flexibility. Cash on hand dropped to $233 million in the quarter from $512 million a year earlier.
Partners got a boost after the end of the quarter when it received $1 billion in accelerated Medicare payments and $314 million in grants from a federal relief program.
Markell said Partners was thankful for the government grants and the advance on Medicare payouts.
“We are hoping that turns into grants, too,” he said.