No end in sight for pandemic strain on California hospitals

More than a year into managing a health care crisis with a financial impact like no other, California’s hospitals are hurting and they need help.

In a report covering more than 400 hospitals statewide, the Sacramento-based California Hospital Association said financial losses last year totaled $14.3 billion, according to Kaufman Hall, a Chicago-based health care consulting firm commissioned by the CHA to produce the “State of the State’s Hospitals” report, released Wednesday.

Even with $6 billion in federal financial support provided through the CARES Act, the state’s hospitals in 2020 still lost $8.3 billion, with more pandemic-caused losses forecast at least through this year, said Carmela Coyle, president and CEO of the CHA.

Continued revenue losses are expected because nonemergent and elective surgeries aren’t fully back despite COVID-19 cases declining and the economy improving. And that is being exacerbated by patients being slow to return, Coyle said.

“Those losses are also driven by expense increases, labor being the number one expense for hospitals,” Coyle said. “About 60% of a typical hospital's costs are for labor. We are about ‘people taking care of people,’ but pay for nurses hit the peak in December and January: $250 an hour for travel nurses to bring them to the state of California.”

B. Konard Jones, president and CEO of NorthBay Healthcare, a nonprofit health care system in Solano County, agreed that the hourly wage of $250 for travel nurses is on target.

The two hospitals NorthBay Healthcare operates — NorthBay Medical Center in Fairfield and NorthBay VacaValley Hospital in Vacaville — have been hit hard from a burned-out workforce and financial losses.

Before the pandemic, NorthBay Healthcare over a decade had a difficult time achieving financial health, but did, and then “in one fell swoop over a year, everything went away,” Jones said.

“Our fiscal impact for 2020 was more than $40 million over two hospitals — an independent health system — and no corporate fallback. That is an enormous amount of money for us to overcome,” Jones said. “This represents the cost of staff overtime, the cost of personal protective equipment and the operational disruption, particularly from the suspension of revenue-producing elective surgeries.”

NorthBay received some money from the CARES Act that helped offset some of those costs, but cuts had to be made, including eliminating about 30 positions and reducing the number of outpatient services that have yet to come back online, he said.

“The biggest thing for us is that our workforce was pressed to the very, very, very top limits. They have burnout, they have stress, and fatigue is prevalent across the entire health system,” Konard said. “So we have been challenged like many others, and we as a health system have not rebounded from this, even though we received CARES Act money.”

Sutter Santa Rosa Regional Hospital, part of the Sutter Health integrated network of care, also received money from the CARES Act, but like NorthBay Healthcare, it wasn’t enough, Sutter Health said in a statement.

“Sutter experienced the toughest financial year in our 100-year history, with an operating loss of $1 billion in 2020, which was only partially offset by the CARES Act,” Sutter said in its statement, noting it doesn’t provide numbers for its individual hospitals. “Our financial challenges and efforts to address them started well before the COVID-19, but the global pandemic accelerated the urgency.”

Sutter also continues to have significant losses from government programs like Medi-Cal and Medicare, “along with rising labor, supply and facility costs, which is contributing to a negative operating margin,” the statement said.

Dan Peterson, Sutter Santa Rosa Regional Hospital’s CEO, said the hospital’s financial situation in Sonoma County is even more challenged with years of back-to-back deadly fires, evacuations and reopenings, as well as public safety power shutoffs.

“Despite all this, our team has shown incredible resolve to carry forward and deliver on our mission to provide safe, compassionate care to this community,” Peterson said.

Dr. Steven Herber, CEO of Adventist Health St. Helena, said the COVID-19 pandemic has amounted to an estimated revenue loss of approximately $20 million, adding it’s hard to completely quantify, but that the hospital also received some federal financial support to help get back on its feet again.

“As we emerge from these challenging times, we are closely managing our expenses,” Herber said. “That said, we are not out of the woods. We rely on the partnerships we’ve developed in our community and want them to know we are 100% open and operational.”

Herber said that from the beginning of the pandemic, the hospital shifted its focus, starting with testing at clinic sites and outreach via its mobile team, then transitioned to vaccinating the community.

“If there is a silver lining during these challenging times, it would have to be the resiliency of our staff and volunteers. We never missed a beat.” Herber said. “We provided, and continue to provide, necessary care in spite of the COVID-19 pandemic.”

At MarinHealth, overall admissions, emergency department visits, births and surgeries have experienced double-digit declines, according to Dr. David Klein, CEO. By the end of 2020, the hospital had seen a $43 million reduction in patient-care revenues related to this volume loss.

“What’s more, through the pandemic, there were $15 million of direct costs incurred, which included incremental personal protective equipment costs, investments we made in telemedicine technologies, the labor required for COVID-19 patient care and mitigation strategies, and increased professional fees,” Klein said, noting that $9 million of those losses have been offset by funding received from the CARES Act. “We are hoping for a reimbursement from FEMA to partially offset these losses, but it may take years to dig out of this necessary financial situation.”

The good news, Klein said, is that the Marin community is beginning to see the light at the end of the tunnel. The county is in the orange tier (“moderate” risk) of the state’s Blueprint for a Safer Economy, and is anticipated to enter the yellow tier — the least-restrictive category — next week, according to Marin County health officials.

“While we still have a long way to go, we are seeing improvements,” Klein said.

Back at Sutter Santa Rosa Regional Hospital, Peterson noted that Sutter Health is continuing with its commitment to the construction of the Santa Rosa hospital’s new 70,000-square-foot expansion, which will add dozens more patient beds in a state-of-the-art structure that is seismically safe.

To that end, the CHA is advocating for the state to ease its seismic regulations, which must be met by 2030 and comes with a hefty price tag.

“Hospitals do not have $100 billion to spend retrofitting for seismic and we've just come through this COVID pandemic,” Coyle said. “We need to think about disasters and California's disaster response much more broadly.”

CHA also wants to see proposed legislation dropped that would give mandatory bonuses to health care workers, which Coyle said is well-deserved, but not feasible.

“We’re just 100 days out from a point in time when we had more than 52,000 people testing COVID-positive in a single day, and nearly 23,000 people hospitalized in California on a single day due to COVID,” Coyle said. “California’s hospitals have really for the last year, but most certainly over these last several months, been running a COVID marathon … and it has taken a toll on California's hospitals, on the nurses and doctors and so many others who work there.”

Cheryl Sarfaty covers tourism, hospitality, health care and education. She previously worked for a Gannett daily newspaper in New Jersey and NJBIZ, the state’s business journal. Cheryl has freelanced for business journals in Sacramento, Silicon Valley, San Francisco and Lehigh Valley, Pennsylvania. She has a bachelor’s degree in journalism from California State University, Northridge. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.

The Sutter Health portion of this story has been updated to reflect the $1 billion revenue loss in 2020 was across the Sutter Health integrated network, not specifically Sutter Santa Rosa Regional Hospital. Sutter Health does not provide financials for its individual hospitals.