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Coronavirus victims could include Northern California hospitals themselves

California’s hospitals could see up to a $15 billion net loss in revenues through 2020, plus another $2.1 billion by April of next year, according to a report by health care analytics and consulting firm Kaufman Hall.

Released last month, “The Financial Impact of COVID-19 on California Hospitals” study was commissioned by the California Hospital Association, a membership-based health policy and advocacy organization out of Sacramento.

What impact a recession and pandemic will have on hospitals is hard to predict, but authors of a separate study by the California Health Care Foundation state they could include hospital price inflation, expanded telehealth visits and tightening of operational efficiencies, among others.

Even before the novel coronavirus outbreak, the state’s hospitals and health care systems were facing an uphill financial battle between ongoing operating expenses and capital expenditures, including investments to meet state-mandated retrofitting or new building requirements in preparation for earthquakes, according to the Kaufman Hall study.

Now, in the face of the financial impact from the pandemic, hospitals will need to make long-lasting changes, including in the North Bay.

“Making decisions during this challenging time weighs heavily on me and the rest of the executive team, as we have to carefully balance the best interests of the hospital, our patients and our employees,” said Lee Domanico, CEO at MarinHealth Medical Center. “We’ve had to reduce hours and temporarily furlough many care team members. I look forward to the day when we can bring everyone back to work.”

To date, MarinHealth Medical Center has admitted up to 22 COVID-19 patients per day while caring for another 100-plus patients for other illness or injury, he said.

Domanico said that while he feels positive about the future of MarinHealth, the hospital has “suffered a loss of more than $37 million between March and May 2020 when the pandemic began, and patient levels dropped significantly due to the shelter-in-place mandate and our shutdown of elective procedures.” Volumes recently have begun to return to budget levels, he added, and the hospital has implemented a $90 million revitalization plan designed to help recoup the initial losses.

The hospital remains on track to open its long-planned new facility in September, and so far has received more than $3 million from the community to support its COVID-19 response, Domanico said.

While MarinHealth Medical Center appears on track to sidestep a long-term financial hit from the pandemic, the Kaufman Hall study found a number of indicators that may lead to some hospitals in the state having to make deeper cuts in an effort to survive. They include workforce reductions, permanent reductions in patient care volume, hospital closures and tough financial choices.

When Healdsburg District Hospital announced in May it had chosen James Schuessler as its new CEO, part of that decision was based on his previous successes reviving hospitals’ finances — something that is needed at the Healdsburg facility.

“I would say the financial circumstances that has been precipitated by COVID-19 and our inability to operate our operating rooms up until … recently has been top of mind every morning,” Schuessler told the Business Journal last month. “We have a significant gap between our expenses on an ongoing basis and our revenue run-rate. Getting that gap closed is really what our whole team is focusing on right now. That includes increasing revenue, and we talked about how important increasing surgical volume is to that.”

In addition, Schuessler is looking for opportunities to consolidate roles to help the hospital move forward with a more efficient operating budget than it has had in the past.

“To a certain extent, the short-term pain that the COVID-19 revenue reduction has placed on us will allow us to emerge on the other side of that with a slightly leaner and more sustainable organization on the expense side,” he said.

The hospital for some time has been working to help secure its future through a partnership with St. Joseph Health, a move Schuessler noted could help bolster some of the hospital’s long-term objectives and capital needs. Talks are ongoing, with a possible agreement in place before year’s end, he said.

“California’s hospitals are facing an unprecedented fiscal crisis,” Carmela Coyle, president and CEO of the California Hospital Association, stated upon release of the Kaufman Hall study.

Some good news came on June 22, when the state budget was released and prevented an estimated $500 million cut to Medi-Cal providers, but the budget didn’t allocate funds for the state’s hospitals, Coyle said.

“While hospitals appreciate the leadership necessary to ensure the Medi-Cal program is protected,” Coyle added, “we are disappointed the budget deal does not provide the financial lifeline hospitals so desperately need to stem the unprecedented fiscal crisis that has resulted from the COVID-19 pandemic.”

Staff Writer Cheryl Sarfaty covers tourism, hospitality, health care and education. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.

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