Some Rural Hospitals May Not Recover From The Financial Impact Of The Coronavirus

May 13, 2020

“Ghost town” is a phrase that’s been used to describe medical facilities in both urban and rural Pennsylvania.

In March the state ordered health systems to pause non-emergency care to prepare for a surge of COVID-19 patients that, in many cases, never materialized. Providers believe some people have not sought urgent or emergency medical treatment out of fear of exposure to the coronavirus.

The resulting loss of income is so significant that Pennsylvania’s health care landscape may forever be altered, particularly in rural communities.

One system that’s faced brutal choices due to the pandemic’s economic consequences is Penn Highlands Healthcare, located in rural northwest Pennsylvania. In mid-April, it laid off or furloughed nearly 600 employees.

“They’re horrible decisions to have to [make]. You know you’re affecting people’s livelihood,” said Heather Schneider, the chief financial officer of Penn Highlands, headquartered in Clearfield County.

Schneider said that roughly 80 percent of surgeries at Penn Highlands are out-patient elective procedures, such as hernia repairs and cataract removals. The system also had to reconfigure resources for emergency COVID-19 care, and stock up on supplies like masks and gowns, the prices of which have skyrocketed.

“You have to keep the system going for the patients that needs to come in,” said Schneider. “If you’re upside down in your finances, at some point, you’ve got to reduce those expenses when you don’t have revenue to offset it.”

With the state’s blessing, medical providers have resumed routine care and are again generating revenue. But Schneider said it will take a couple months before Penn Highlands is preforming surgeries at pre-COVID-19 levels, and even more time for the system to recover financially.

“Not only are the patients not standing at the door waiting to come in for it they’re going to go back through pre-operative work, testing. People have held off on all of that,” she said.

Andy Carter, head of the industry group the Hospital and Healthsystem Association of Pennsylvania, said even before the coronavirus, many hospitals were financially stressed, a number of which are located in rural Pennsylvania. A 2019 report from his organization shows that last year, one-third of the state’s hospitals operated in the red.

“Then another 29 percent had margins of four percent or less, which is razor thin,” said Carter, who estimates that even after factoring in federal stimulus funding, Pennsylvania’s health system will see $7 billion in losses during 2020. Hospitals that are not part of larger networks are particularly vulnerable.

“We face a very high risk that substantial health care capacity will be forever lost in Pennsylvania,” he said.

Many rural communities already have limited health resources, so the loss of a hospital can have a significant impact on a population’s health.

“Typical there’s a higher instance of poverty, a higher instance of unemployment, there’s a higher instance of folks that don’t have transportation,” said Jennifer Edwards, who works with medical systems in the Pennsylvania Office of Rural Health. “My fear is just that there’s already rural disparities with the health of rural communities. That those disparities will increase significantly if we see more hospitals close.”

One policy solution Edwards suggests is loosening the requirements for hospitals to be classified as “critical access.” This designation for certain rural facilities comes with larger Medicare reimbursements.

There’s also the Coronavirus Aid, Relief, and Economic Security Act, which was passed by Congress in March and includes $10 billion for rural health providers.

“Right now, it’s unknown how they’re going to allocate that, or when it’s going to come out,” said Heather Schneider of Penn Highlands Healthcare. “We’re kind of crossing our fingers to see what kind of help we can get from that.”

In the meantime, Schneider said Penn Highlands will be limiting services to procedures that generate the most revenue.