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As COVID-19 Drains Hospitals, Some in N.H. ‘Barely Keeping the Lights On’

LRGHealthcare Facebook Page

In the middle of March, LRGHealthcare — already drowning in debt — added more stones to its pockets. To prepare for a possible surge in coronavirus patients, the parent company of Lakes Region General Hospital in Laconia and Franklin Regional Hospital was forced to cancel all of its elective procedures.

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The move was meant to both free up beds that might be needed to treat severe cases of COVID-19 as well as to conserve personal protective equipment, or PPE. That meant non-emergency procedures such as knee replacements and radiology — the types of medical care that typically turn a profit for providers — were delayed.

While the need to conserve PPE remains urgent for healthcare facilities across the state, a surge in coronavirus patients hasn’t yet materialized.

“Walk the halls of the organization, it is an odd mix of complete emptiness, and a bustle of activity,” said Kevin Donovan, LRGHealthcare’s CEO.

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As of Monday, there were 78 COVID-19 patients hospitalized statewide, including only a handful at Lakes Region General Hospital. Of the more than 1,400 cases identified in the state since the outbreak began, only about 14 percent have required hospitalization.

From a public health standpoint, that’s a laudable success. But the cancellation of most of LRGHealthcare’s elective procedures has been brutal on its finances.

'The COVID-19 pandemic has caused us to go from grim or dire, to barely keeping the lights on.'

“We are down approximately 60 percent from a revenue perspective, and going into the pandemic, we were a relatively weak financially based organization.” said Donovan. “The COVID-19 pandemic has caused us to go from grim or dire, to barely keeping the lights on.”

LRGHealthcare was perhaps the least prepared entity in the state for the current pandemic and resulting financial shock. The nonprofit carries $112 million in debt, according to Donovan, far more than is considered healthy for an organization with approximately $200 million in annual revenues.

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Losses, Always a Risk, Begin to Mount

The slow drip of COVID-19 patients combined with the cancellation of elective procedures is leaving a deep bruise on hospitals around New Hampshire. And while LRGHealthcare’s financial outlook is perhaps the most severe, multiple hospitals in New Hampshire, particularly smaller, rural ones, were on precarious footing heading into the current public health crisis.

A review of public tax filings show that facilities including Cottage Hospital in Haverhill, Cheshire Medical Center in Keene, as well as Frisbie Memorial Hospital in Rochester all saw expenses outpace revenues in the most recently available year.

Frisbie, in particular, was in serious distress — facing annual losses of between $15 million and $24 million in each of the past three years, according to publicly available tax records. When the New Hampshire Attorney General’s office evaluated Frisbie’s financial outlook as part of a proposed acquisition earlier this year, before the COVID-19 pandemic, they came to the conclusion that without that sale Frisbie “likely will not be viable.”

'Many hospitals across the country, and hospitals in New Hampshire, are not in a strong financial position, particularly our small rural hospitals.'

Profit margins for rural hospitals, even in normal times, are slim. Nearly half of rural hospitals nationwide lose money each year, according to the National Rural Health Association.

“For most hospitals, getting a 2 to 3 percent margin — margin being profit — really is considered to be pretty good,” said Paul Gardent, a professor of business administration at Dartmouth’s Tuck School of Business. “Many hospitals across the country, and hospitals in New Hampshire, are not in a strong financial position, particularly our small rural hospitals.”

Those in the industry point to a mixture of changing demographics, including declining and aging populations, as well as stagnant Medicare rates to explain its slim financial cushion.

“Pre-COVID, on any given year, my goal for us is to break-even,” said Travis Boucher, chief financial officer for Speare Memorial Hospital in Plymouth.

Speare was already seeing financial losses in January and February, before COVID-19 forced the hospital to upend its normal operating procedures. Then the virus hit, sending Speare’s revenues down 54 percent, according to Boucher. He's bracing for losses between $3 and $5 million in April alone.

“And for an organization that just tries to break even, that’s huge,” said Boucher.

Without the ability to perform elective procedures, hospitals say they can’t generate the revenue needed to turn a profit. One study published in the Academy of Emergency Medicine found that patients receiving scheduled procedures generate on average $700 more per patient than someone who walks in through the ER.

“The procedures that we stopped doing are the very fuel that subsidizes everything else we do,” said Thomas Mee, CEO of North Country HealthCare.

Mee’s health system includes Androscoggin Valley Hospital, Weeks Medical Center and Upper Connecticut Valley, the state’s smallest facility at 16 beds.

So far, just two cases of COVID-19 have been identified in Coos County. Meanwhile, Mee estimates his revenues are down about 75 percent.

“The irony is striking that we are taking all of these steps to prepare for a surge, and now we hurry up and wait,” said Mee. “But in the meantime, the hospitals are quite empty.”

Emergency Funding Reaches Some Hospitals

In mid-March, Gov. Chris Sununu announced a $50 million emergency loan fund to help healthcare facilities weather the pandemic. The state’s health executives say that won’t be nearly enough. According to the New Hampshire Hospital Association, its members are losing a total of $200 million a month in revenue due to the pandemic. To date, the state says it has awarded emergency loans to at least six hospitals as well as numerous smaller medical providers.

Cottage Hospital in Haverhill received $1 million, which amounts to roughly 3 percent of its annual revenue, according to its last available tax filing. Weeks Memorial and Upper Connecticut Valley, both part of North Country Healthcare, each received $750,000 in emergency loans, also amounting to about 1.5 percent and four percent, respectively, of their most recent revenue totals.

LRGHealthcare received $5.25 million, or 10 percent of the state’s total emergency healthcare loan fund —an acknowledgement of its dire financial picture. It also received its first emergency funds from the federal government’s $2 trillion CARES Act.

“We got $4 million,” said LRGHealthcare’s Kevin Donovan. “That sounds like a lot of money, but that’s about one week's worth of expenses.”

He estimates his hospital system has the resources to stay open through the end of May, if no other support arrives. Speare Memorial received about $900,000 in federal money, well short of the $3 to $5 million it is expecting to lose this month alone.

“The reality is every little bit helps,” said chief financial officer Travis Boucher.

Hospital executives say maintaining a healthy reserve of cash on hand is their number one priority at the moment. To preserve that cash, multiple facilities have furloughed workers.

On Tuesday, Catholic Medical Center announced it was temporarily laying off 400 workers and reducing the hours for 900 more. The hospital says it lost $11 million, a result of more than half of its inpatient beds currently unoccupied.

'We have about three-and-a-half months before we run out of money if we burn through our revenues as we are currently doing'

Last week, SolutionHealth, the company that oversees Elliot Health System in Manchester and Southern New Hampshire Health in Nashua, furloughed 650 staff members and is reducing the hours of 750 more. It also trimmed executive pay by 15 percent. In total, one out of every five of its employees is impacted, according to SolutionHealth.

“Their lives are affected, and we fully anticipate that this will be temporary, but this is dislocating for people,” said Steve Norton, chief strategy officer for SolutionHealth.

The health system is losing an estimated $24 million in revenues due to the pandemic.

“We have about three-and-a-half months before we run out of money if we burn through our revenues as we are currently doing,” Norton said.

While Norton says his hospitals were in sound financial footing before the pandemic, SolutionHealth is now putting big capital projects, including a possible expansion of the Elliot’s emergency department, on hold until the financial picture clears.

“Whether you are a small hospital or a big hospital, the impacts will be different,” he said. “But we will be profoundly different organizations on the other side of this pandemic.”

Todd started as a news correspondent with NHPR in 2009. He spent nearly a decade in the non-profit world, working with international development agencies and anti-poverty groups. He holds a master’s degree in public administration from Columbia University. He can be reached at tbookman@nhpr.org.
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