Michigan hospitals took a $1.1 billion financial hit this spring from the COVID-19 pandemic, a cost that continues to grow.
The net financial effect on Michigan hospitals resulted from the $3.2 billion in revenue lost during the several weeks hospitals were unable to perform non-essential procedures and surgeries, plus $440 million in emergency expenses, according to a report issued today by the Michigan Health and Hospital Association.
The emergency expenses include $93 million on personal protection equipment at an “exponentially higher rate” for staff.
The lost revenue and PPE cost was partially offset by the $2.1 billion Michigan hospitals collectively received in federal aid through the CARES Act. The $1.1 billion net financial loss is “growing as hospitals continue to respond to the COVID-19 pandemic,” the association said.
Hospitals as well are “treating an increasing population of unemployed patients who have lost private insurance coverage” during the pandemic.
The MHA based the report on data that hospitals voluntarily submitted for March to mid-June, a period that largely coincides with Gov. Gretchen Whitmer’s executive order that required them to delay or cancel non-essential surgeries and procedures to mitigate the spread of the coronavirus and dedicate staff to care for an influx of COVID-19 patients.
“When COVID-19 arrived in Michigan, hospitals became the front line of defense against the highly contagious and dangerous disease,” MHA CEO Brian Peters said. “As this report demonstrates, responding to the COVID-19 pandemic has come at a steep price. Now more than ever, support is needed for the hospitals and health care providers that have been serving on the front lines of the pandemic.”
The pandemic overwhelmed some hospitals in hard-hit Southeast Michigan. While some hospitals had few or no COVID-19 patients, they still had to implement emergency preparedness plans and acquire PPE, according to the MHA report.
“While caseloads have varied across the state, the impact has been felt by every hospital and health system,” the MHA report states.
Many hospitals suffered operating losses because of the pandemic, leading to furloughs or layoffs as well as cut costs with measures including hiring freezes, restrictions on staff travel and cutting executive pay.
In Grand Rapids, Spectrum Health recorded a $22.8 million operating loss for the first quarter on revenue of $802.5 million across its West Michigan hospitals. The health system had been budgeted for operating income of $31.5 million, as MiBiz reported in June.
Spectrum Health Lakeland in St. Joseph, which operates as a separate division, recorded a $4.7 million operating loss on $137.2 million in operating revenue. Lakeland was budgeted for $5.3 million in operating income for the first quarter.
While the MHA did not have data on how much the $3.2 billion in lost revenue represents compared to hospitals’ total patient revenue, the report anecdotally cited the case of Midland-based MidMichigan Health. Compared to the same period a year earlier, the hospital lost 24 percent of inpatient volume from March to mid-June.
MidMichigan Health in the federal government’s most recent fiscal year recorded $1.09 billion in gross patient revenue, according to an American Hospital Association database.
In the report, Peters and MHA Board of Trustees Chairman Edwin Ness, president and CEO of Munson Healthcare in Traverse City, urged state lawmakers as they work on a budget for the next fiscal year to spare hospitals from any cuts.
“Special consideration needs to be made for hospitals and healthcare providers that have been serving on the front lines of the pandemic. Not only are hospitals major employers, but any effort to reinvigorate the overall Michigan economy will fail to succeed if hospitals — which are critical in dealing with the pandemic and ensuring a healthy workforce — are not able to survive and thrive,” the MHA report states. “Any significant funding cuts made to hospitals through the state budget process will severely hinder our ability to treat all patients and help return our state economy to any degree of normalcy. In short, it is now time to stop the financial bleeding for hospitals, not exacerbate it.”
Statewide, hospitals as of 2018 directly employed 601,594 people who earned $39.3 billion in wages and salaries, according to an annual report on health care’s economic impact issued by the MHA, Michigan State Medical Society and Michigan Osteopathic Association.
The report also noted the pandemic’s toll on health care workers.
“The pandemic has physically and mentally impacted the entire healthcare workforce. Exposure to and contraction of COVID-19 led to hundreds of personnel being placed on leave,” the report states. “As staff physically recover, many more struggle with feelings of stress, grief and loss. Hospitals are working to address these challenges.
During the height of the pandemic in April, according to the MHA, hospitals in Michigan each day used:
- 36,000 N95 face masks
- 1.53 million gloves
- 330,000 surgical masks
- 46,000 surgical gowns, and
- •20,000 face shields