The Cost of Crisis

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Ben Spence

When hospitals started shutting their doors to elective surgeries in mid-March as the  COVID-19 pandemic began creeping across the country, Lee Health was almost halfway into its fiscal year. Volumes were up 10% from 2019, and the health system was having a record year. In two weeks, volumes dropped 15% and revenue was down nearly $12 million. “We knew the last two weeks of March would be the beginning [of the pandemic], but we didn’t know the magnitude going forward in terms of the number of cases and financial impact,” says CFO Ben Spence. “We knew that if we canceled elective surgery, we could potentially lose $30 million or more per month.”

With a significant reduction in revenues, hospitals across the country laid off or furloughed hundreds—or even thousands—of employees. Health care margins are already thin, the average being a mere 3.5%, according to the American Hospital Association (AHA). Patients are slowly returning, but with a lower volume than usual, the AHA estimates that hospitals and health systems will lose around $20.1 billion per month through the end of 2020.

Ben Spence

Spence estimates that Lee Health—which operates 95% of the hospital beds in Lee County—was down around $135 million in revenue between the months of March and June. In April, a number of outpatient facilties closed and volumes were down 60% on surgery, and 40% overall. Even when some elective surgeries resumed in May, the numbers were still low. Patients simply weren’t coming in. “One thing we didn’t expect was that not only were surgical cases down, but the amount of people coming to ER was also down by about 18%,” explains Spence.

“People weren’t coming in with medical cases like a heart attack or stroke. It was a bit of a mystery, since you know people are still getting sick.”

Family Health Center of Southwest Florida Inc. (FHC), which cares for people on Medicare, on Medicaid or without insurance, was experiencing a similar situation. “We took a significant hit— like everyone did—because people were afraid to come out,” says Executive Vice President and Chief Medical Officer Dr. Jorge Quiñonez, adding that volumes were down 60% from late March to early June. “The dental department took the biggest hit because there was an executive order that only allowed emergency care, so they couldn’t do any elective dentistry, and most of dental is elective.”

 

RECOVERY MODE

In September, Lee Health’s deficit was reduced to $18 million from $90 million six months ago. The organization created a comprehensive financial recovery plan that focused on purchase services and cut $28 million in contracts that could be canceled or renegotiated. Costs were also cut by reducing supply use, but as supplies were running in short supply during the pandemic, prices increased on essential items such as N95 masks, gowns and gloves. The use rate went from 1,000 gowns to 11,000 a week, and “keeping an adequate inventory of these items was a challenge,” Spence says. “This was not only a major health crisis, it was also a major financial crisis for our system.”

As places reopened, and the community wasn’t complying with social distancing guidelines, there was a spike in local COVID cases. In July, Lee Health had 360 COVID patients. “It started to get very concerning, because if those numbers increase at the same rate, you could potentially fill all your hospital beds and not have enough room,” Spence says. In October, numbers were back down to 50 or 60 cases, the same amount as when the pandemic started. However, in early November, cases were averaging 80 a day.

At the 50-bed Landmark Hospital, a critical care facility in North Naples, there are a few patients who have been sick since the summer and seven or eight patients who are seriously ill, says Dr. Lawrence Albert, the director of the hospital’s intensive care unit and concierge-based doctor at Naples Pulmonary. “COVID has really changed what we see at Landmark,” he says. “We are at seasonal levels, like the height of February and March now (in September). From my perspective, these COVID-19 patients are much more difficult to handle and require more resources than the average patient.”

The patients they are receiving were put on a ventilator and didn’t get better or die from the virus. They’re weak, have high oxygen requirements and experience multisystem organ problems. The overwhelming majority are obese, have immune suppression from cancer or have heart disease. “Many have had three or four problems before the bug, and then they get it and end up in the hospital,” he says, adding that increased death rates across the country are not because there are more cases, it’s because of people who have the virus and aren’t getting better. “We’re not overwhelmed right now, but people who are really sick are still occupying beds in ICU that wouldn’t have been there a year ago.”

 

Dr. Jorge Quiñonez

STAFFING SOLUTIONS

As the first wave of the pandemic started in Southwest Florida, both Lee Health and FHC managed to keep their staff, “which was a huge win,” Dr. Quiñonez says. Lee Health introduced a voluntary exit program in June that gave employees the option to leave their positions with a severance package or take a summer sabbatical, for which more than 600 people applied. “It was really well received and a great alternative to layoffs, which we wanted to avoid at all cost,” Spence says.

In 2021, however, Lee Health announced it is freezing salaries and reducing benefits and raises for its 13,500 employees for the first time in nine years. The organization has also put a halt on all of its projects except for the $347 million expansion of Gulf Coast Medical Center in Fort Myers, which is slated for completion in 2021. When speaking with Spence in September, however, he seemed positive about the growth potential in the region. Realtors are seeing an uptick in people relocating to the area, which could drive an increase in population and potentially be a revenue-generating solution for the region’s health care system. The pandemic also encouraged health care solutions including telehealth, which is a growing industry that Dr. Quiñonez says “can be great for behavioral health and follow-up, but the majority of patients still enjoy face-to-face appointments.” As a way to ease concerned patients back into the office, FHC is personally calling people to let them know they’re open. “The beauty of it is that patients are coming back,” Dr. Quiñonez says. “They left a lot of things unattended during the pandemic, so there’s a lot more people trying to come in now.”

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