One by one, COVID-19 outbreaks popped up in April and May at meatpacking plants across the country, fanning fears that the infectious coronavirus could spread rapidly into rural states. Plants closed temporarily in small metro areas like Waterloo, and Sioux Falls, South Dakota, but also smaller Iowa towns like Tama, Columbus Junction and Perry.
Leaders at Buena Vista Regional Medical Center in Storm Lake, a northwest Iowa town of 10,500 with a Tyson Foods packing plant, knew their time would come.
“We just didn’t know to what degree,” Rob Colerick, the hospital CEO and administrator, said. “I mean, you saw it in Columbus Junction. You saw it in Waterloo. You saw it in Sioux Falls. Certainly, the dynamics were present to have a similar situation here.”
What Colerick and other rural hospital administrators, industry leaders and researchers knew was that they had entered the pandemic last spring facing financial crises so extreme that hospital closings were a real possibility in small towns across the nation, including Iowa.
Most of those at risk were at critical access hospitals, small hospitals with 25 or fewer general care beds that people in rural areas depend on for accessible health care. Beyond the health benefits, hospitals make a rural community economically attractive for both businesses and residents.
Three out of every four of the nation’s critical access hospitals had negative operating income going into the pandemic, according to an analysis done by a collaboration of news outlets that are members of the Institute for Nonprofit News: IowaWatch, Wisconsin Watch, Reveal from The Center for Investigative Reporting and Side Effects Public Media. The main reason: It costs more to treat people than insurance and patients pay for that care.
The national operating income rate has worsened, from 69% of the critical access hospitals running with negative operating income in 2015 to 75% in 2019, the analysis showed.
Compounding the problem, hospitals focusing on handling the pandemic last spring canceled non-emergency medical procedures that would have produced income needed to deliver patient care.
“Some of the federal stimulus, particularly in rural hospitals, is covering that expense but certainly is not providing any type of padding financially within in the future,” Kirk Norris, president of the Iowa Hospital Association said.
That federal aid came from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program but also advance Medicare payments for roughly 60% of the nation’s hospitals willing to comply with rules attached to paying back the advances.
The cash boost was so substantial that some hospital leaders in the Midwest said in interviews they had stronger income this past summer than in summer 2019.
But the infusion was only a temporary lifeline, not the permanent fix hospital industry leaders say is needed, most likely from the federal government, to keep some critical access hospitals from closing.
“The subsidy, the support helped to keep them afloat for a couple months,” said Mark Holmes, director at the University of North Carolina’s Cecil G. Sheps Center for Health Services Research, which keeps tabs on hospitals at risk of closing because of financial hardship.
“But, eventually there comes a time,” Holmes said of the at-risk hospitals. “And a very common experience is: by Wednesday night they realize they can’t make payroll on Friday. So, it’s often a pretty short window when these things are announced. I think that’s going to be the type of pattern that we see.”
The scenario Holmes laid out could happen within a year without more federal funding for hospitals that entered 2020 already on shaky financial ground, he said. Meanwhile, infection rates are rising in several rural states.
Wisconsin had 246 patients with COVID-19 in intensive care on Oct. 14, the state’s Department of Health Services reported. It already needed more ICU beds than it had available for a surge that could result in needing 750 ICU beds to care for patients with COVID-19 by mid-November, University of Washington researchers tracking and predicting the virus’ impact projected.
Arkansas and South Dakota are among rural states the researchers predict will be out of ICU beds for COVID-19 patients — within a few days in South Dakota and as soon as late October in Arkansas. Montana, they said, could be short beds in January.
“It’s hard to imagine us coming back with any type of cheery disposition to say, ‘Oh, wow, we turned a corner,’” Michael Topchik, national leader for the private rural hospital assessment firm, Chartis Center for Rural Health, said. “You’ll continue to see more hospital closures.”
The closures could be catastrophic for small towns because they tend to be the largest or second-largest employer, Topchik said. “All of Main Street shutters as soon as one of these rural hospitals close,” he said. “You’re talking Dust Bowl stuff. You’re talking, you know, tumbleweeds-going-through-the-streets-type stuff when that happens. So I think the cost is far greater than you think.”
Nationally, 132 rural hospitals have closed since 2010, including 15 closing this year, the Cecil G. Sheps Center for Health Services Research reports in its database of hospitals at risk.
Meanwhile, the CARES Act has pumped $175 billion into the nation’s hospitals, clinics, medical practices, cities and other entities treating and testing for COVID-19, a share of which reached rural hospitals. Stimulus money provided an additional $10 billion specifically for rural hospitals and $1 billion for specialty rural hospitals, which are suburban hospitals that provide health care primarily to rural areas and which operate on small margins.
Health care and social assistance programs, including some rural hospitals, also collected a total of $67.4 billion in Paycheck Protection Program money, the Small Business Administration reported.
Two of every five critical access hospitals in the country still lost money after non-patient revenue was added to their ledgers in the last fiscal year for which reports exist. They received an average of $3.5 million, each, in CARES funding, according to interviews and analysis of Health and Human Services data from July and hospital financial data from the American Hospital Directory.
One-third of the nation’s critical access hospitals earned enough to report net income gains of more than $1 million in their last fiscal year; these facilities received, on average, $4.5 million from CARES funding. CARES funding amounts were based on formulas that include previous income and, in some cases, Medicare billings.
Hospitals also were eligible for $92 billion in accelerated and advance Medicare payments. The Medicare payments must be paid back to the Centers for Medicare and Medicaid Services.
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Critical access hospitals originally had to start paying that money back in Medicare credits one year after receiving the first advances in April and May, but large hospitals had to start 120 days after receiving it. That would have been now for the large hospitals, but Congress stretched the period the money is owed for all hospitals to as much as 29 months in the September appropriations resolution that kept the federal government open until Dec. 11.
That resolution also dropped the interest rate for overdue repayment, from 10.25% to 4%. Industry groups, including the American Hospital Association and Federation of American Hospitals, have sought forgiveness of the payments.
“It provides a slower period of repayment and it eases the amounts of repayment,” Erin Richardson, the Federation of American Hospitals’ senior vice president for government affairs, said in an interview.
Temporary funding boost, trying solutions
The Genesis Health System, a 17-county, 75-location operation in eastern Iowa and western Illinois, collected more money than it spent heading out of summer at its three critical access hospitals, in Maquoketa and DeWitt in Iowa and Aledo, Illinois. Curt Coleman, Genesis’ president of critical access hospitals, said each facility had been on track to lose up to $1.5 million from April through June after canceling non-emergency clinical procedures.
Genesis hospital leaders started meeting in mid-March and continued to do so nearly non-stop through April with one topic: COVID-19, Coleman said. As summer came and went, hospital leaders felt they had a better grip on treating the virus than they did in March, he said.
Early planning was cited in interviews with rural hospital leaders as a way those operators tried to respond to the virus as it started to spread. So were clear communication internally and with the public, and willingness to take extraordinary steps to deal with the pandemic.
“The depth and the level of detail that we got into in terms of not only COVID planning but execution is so far beyond what we’ve ever experienced and, hopefully, far beyond what we ever will have to experience again,” he said.
CARES gave the three critical access hospital amounts ranging from $300,000 to $350,000 in April and another $3.4 million to $3.6 million in the second wave of stimulus money for rural hospitals. When Jackson County Regional Health Center in Maquoketa qualified for another $1.5 million from the Paycheck Protection Program, it could cover three months of salaries, Coleman said.
“So, COVID actually was, from a financial standpoint, helpful to us,” he said.
Maquoketa’s hospital financial reports had shown net income of $382,756 in the fiscal year ending June 30, 2019, but without aid from foundations, bequests, gift shop sales and the federal government, the hospital would have experienced a negative operating income of $1.3 million.
“It’s just a bit ironic that it took a pandemic to really provide some additional stimulus and support for hospitals that were losing money on a normal business day,” Coleman said. “And it took a pandemic and it took some stimulus to, kind of, stabilize that out.”
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MercyOne Elkader Medical Center, in northeast Iowa, used its $3.5 million in CARES funding to offset revenue losses but also to prepare for COVID-19 in the coming months, hospital CEO Brooke Kensinger said. Some of the money was to fund capital projects that help the hospital with health assessments, isolation, transportation and safely treating the virus, Kensinger said.
Her hospital did not seek accelerated and advanced Medicare payments, she said. MercyOne Elkader showed $119,875 in earnings for the fiscal year ending June 30, 2019, although non-patient revenue was needed to be in the black.
“Many of the actions that we took in the spring in preparation for COVID-19 have paid off,” Kensinger said. “We were very conservative with our spending and chose to hold off on filling positions that were open until we were further into the pandemic and understood how it would affect our community (and) hospital.”
Other attempts to work through the pandemic, administrators and rural health researchers said in interviews, include the expansion of telemedicine, relying on a set annual Medicare payment instead of payments tied to individual procedures, and working within hospital staff’s capacity to provide healthcare.
Rural problems multiply near meatpacking plants
Nearly 1 of every 10 county residents around Storm Lake, where Tyson Foods has a pork processing plant, has tested positive for COVID-19. As of mid-October, 12 had died, Iowa’s state-run coronavirus database shows. Four were from the packing plant, the Storm Lake Times has reported. The state and county will not say how many deaths were from the plant.
The county’s surge started in late May and continued until early July. “We were just knee deep in COVID here,” Pam Bogue, the Buena Vista County public health administrator, said.
By mid-October, 2,160 people had tested positive for the coronavirus in her county – half of them ages 18 to 40 – and 10 to 20 new positive tests were coming in daily. The seven-day averages for the county, population 19,620, were increasing slightly in October, with 30 one early October day, Bogue said. “It’s a bump,” she said of the recent cases, although “it’s not as bad as it was Memorial Day.”
Mark Holmes, at the North Carolina rural health research center, said the danger is that COVID-19 spreads beyond confined places like a meatpacking plant, a nursing home or a prison.
“The prison guards go home at night,” he said. “The nursing home workers may have a second job or go out to eat, go to a grocery store. And the food processing employees live with other people who are also moving. So the infection in any three of these is going to lead to something that can be spread as well.”
Rob Colerick, the hospital CEO in Storm Lake, said roughly 7 of every 10 among county residents testing positive for COVID-19 as of mid-October went to Buena Vista Regional Medical Center. The rest went to specialty care out of town.
Colerick said Buena Vista Regional had enough beds to handle the surge because managers prepared in March and adapted. “I hate to say ‘hurry up and wait’ but you saw what was happening around the country and kind of tweaked things as you went,” he said.
Getting $7.6 million in CARES Act funding and additional Paycheck Protection Program money helped the hospital pay its normal bills when funding from procedures canceled at the end of March stopped coming in. The hospital had ended its most recently reported fiscal year on June 30, 2019, with a negative 9.2% operating margin. But, non-patient revenue boosted net income for the fiscal year so the hospital could report overall net income of a little more than $1 million going into the pandemic year, financial records show.
The hospital’s census is back to normal this fall, Colerick said. “From a management standpoint, it certainly puts new meaning to the term ‘change management,’” he said about dealing with COVID-19. “You’re sometimes changing by the hour. … In my career, I don’t think we’ve ever managed anything that changed as quickly as this did.”
Looking beyond stimulus money
While pandemic-related funding helped rural hospitals get through summer, the bigger questions about their stability deal with finding long-term solutions, industry leaders and analysts and hospital administrators said in interviews.
“What happens when we’re no longer in a pandemic?” Genesis’ Coleman asked. “How do we fix this reimbursement, the reimbursement issue for our hospitals, and help them become sustainable? I certainly think Medicare can play a role on that. Medicaid, the state can play a role in that. I would like to see our commercial insurance carriers play a role on that because they’re all contributing to the problem now.”
Meanwhile, patients are moving. A little more than 19% of Americans lived in rural areas, the U.S. Census Bureau reported in 2010, down from 21% in 1990. The median age for rural residents, 51, reflects an older population than in urban areas, where the median age is 45, the census bureau reports.
That means more health issues related to an aging population in rural areas than in urban areas. Maine Rural Health Research Center scientists predict the number of people age 65 and older will grow faster in rural areas than in urban areas.
Data for the 2020 census will not be released until next year and COVID-19 has pushed that schedule back.
“The disparity between urban and rural is something that’s always on my mind,” Coleman said. “So, anything that happens: changes in policy, changes in payment, pandemics … triggers how we think about the urban and rural gap. And, of course, our goal is always to make sure we minimize that gap.”
Michael Topchik, at Chartis Center for Rural Health, said he expects hospitals’ financial struggles to get worse as COVID-19 progresses. “COVID absolutely was a curveball,” he said. He said the federal government needs creative federal legislation that gives rural hospitals more long-term financial stability.
Topchik said rural hospitals need help with something big, on par with creating the critical access hospitals designation in the 1997 Balanced Budget Act, or the 1946 Hill-Burton Act that established ways to give healthcare to people who cannot afford it. Without that, “you’re going to continue seeing the erosion of the safety net,” Topchik said.
“You’re going to have this division in society of the haves and the have-nots. The urban versus rural divide will get wider. And, it’s very, very difficult to maintain a quality of life in a rural area if you don’t have modern, quality healthcare at an affordable price.”
This story was produced as part of a multi-newsroom collaboration by of Institute for Nonprofit News members IowaWatch, Wisconsin Watch, Reveal from The Center for Investigative Reporting and Side Effects Public Media. Frank Bass contributed data analysis for Reveal. A national version of this story was published by Reveal and shared with its news partners.
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This IowaWatch story was republished by The Gazette (Cedar Rapids, IA), the Storm Lake Times, the Corridor Business Journal’s Balance newsletter, MSN.com and KCCI.com under IowaWatch’s mission of sharing stories with media partners.
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