Medical bed on wheels in the hospital corridor.

Medical bed on wheels in the hospital corridor. View from below.

Colorado hospitals are projected to lose between $4.6 billion and $7.1 billion in revenue in 2020 and 2021, losses that will be only partially offset by federal stimulus money, according to an analysis by the state hospital association.

Once stimulus money and cuts by hospitals are taken into account, the hole shrinks to between $2 billion and $4.4 billion. But even the lower end of that scale is 11 percent of total hospital revenue, which in recent years has been roughly $18 billion. If the projections are correct, hospitals will lose 11% this year, plus another 11% next year.

While one hospital official said that facilities weren't at risk of closing right now, that concern could grow, depending on how the financials look in the next 12 months. Particularly at risk are small, more rural facilities, which operate on much tighter margins than the Goliath systems that populate urban areas. Nationwide, at least 16 rural hospitals have closed in 2020, according to the University of North Carolina.

Facilities in Colorado and elsewhere across the country weathered a "perfect storm," in the hospital association's words, in the spring. To prepare for potential COVID surges, to preserve and more fundamentally to comply with an executive order from Gov. Jared Polis, hospitals stopped providing non-emergency procedures, which are typically lucrative parts of hospitals' operations. The prohibition on those procedures was intended to preserve protective gear and to keep beds open, should a surge come.

On top of that, Hospitals had to spend money to prepare their facilities, as well -- UCHealth, for instance, spent $23 million from March to June on "pandemic-related expenses." 

What's more, patients stopped coming to the hospital. According to the hospital association's data, overall outpatient visits dropped by 20%. Emergency room visits fell off by 25%, non-urgent surgeries by 27%. 

In late May, the Kaiser Family Foundation released a poll showing that nearly half of Americans had delayed or completely skipped receiving health care during those first few months of the pandemic. Eleven percent said they or their relative's health condition had worsened. A poll from NPR and the Robert Wood Johnson Foundation found that 20 percent of American households had at least one member who couldn't or didn't receive needed care. Multiple studies have shown that mortality from diseases like heart disease and Alzheimers have all increased in states where the virus has surged.

Whether patients return to clinics and emergency rooms in the coming months is the great unknown heading into 2021 and explains the wide range in the projections: The $4.6 billion low end vs. the $7.1 billion high end will largely be determined by what happens with utilization, said Tom Rennell, the association's senior vice president for financial policy and analytics. 

Rennell called the numbers "massive" and said that hospitals statewide may operate at a loss next year; in 2018, net revenue was $1.3 billion. 

More than $876 million in federal money has been provided to the facilities, though Rennell and hospital officials said the federal stimulus, while gratefully accepted, didn't fill the hole.

Between March and June, UCHealth "received $160 million in CARES Act funding," said system spokesman Dan Weaver. "UCHealth greatly appreciates the support from the CARES Act, though it does not fully cover our losses, and it is not certain that we will be able to retain all these funds."

SCL Health, which operates four hospitals in Colorado, including Denver's St. Joseph, has received $119 million in stimulus money, distributed across the entire system. The money does "not come close to bringing our operating margin to the margin we reported as this time last year," said spokeswoman Tiffany Anderson.

The system has posted $63.8 million in net income this year, half of last year's posting, and that net income includes federal stimulus money. By the end of June, operating margin was a third of what it was in 2019, and SCL's total margin was in the red. Operating income was $26.8 million -- but that included $66.1 million in stimulus money, according to a quarterly financial report from the system.

"Volume reductions made to prepare for a potential surge of COVID-19 patients were largely responsible for a $112.5 million decrease in net patient revenue for the six months ended June 30, 2020 compared to the prior year," the system wrote in its report.

Still, the money from the feds has helped prop up facilities and slow more significant cost cutting than the layoffs and furloughs that have already taken place. According to the association's data, stimulus money represented nearly 11 percent of 2018 revenue for rural facilities; it was about 4.5% for urban facilities, though they received more than double what rural facilities received.

Rennell said 2021 may be even worse for hospitals than 2020 was. In the latter year, facilities at least had a normal beginning of the year; for those whose fiscal year ended in June, they had nine months of growth before the crash. With the pandemic showing no sigh of slowing, hospitals may continue to feel the impacts -- lower patient volume, potentially suspending procedures -- for an entire year.

Compounding the situation is the potential for more cuts, handed down from the state as officials attempt to reconcile a yawning budget deficit. 

Ge Bai, a hospital finance expert at Johns Hopkins University, reviewed the association's projections for the Gazette. She said the larger estimates felt too high but that the lower end, a $4.4 billion revenue drop and a net loss of $2 billion, was more likely. 

But she based that analysis on the assumption that this current spike doesn't "linger very long" and that shutdown orders aren't instituted. But if those assumptions are wrong, she said that experts "don't even know what the (upper) limit would be."

Nancy Kane, who teaches at Harvard University's Department of Health Policy and Management, also reviewed the projections and said they seemed "fair enough."

"(They) seem OK to me in terms of the COVID impact on aggregate hospital revenues, with lots of uncertainty of its impact going forward on hospital systems, as well as on the economy/health insurance of the population/state budget," she said in an email.

In financial disclosure documents provided to the federal government, hospitals described the depth of the losses (most of the state's facilities do not publicly publish these reports). UCHealth's operating revenue grew by $600 million between 2018 and 2019, according to an internal audit. But between 2019 and 2020, it increased by roughly $100 million. UCHealth's fiscal year ends on June 30, meaning it only grew by $100 million despite nine months of regular, non-pandemic business. 

The system's net patient service revenue -- things like in and outpatient visits, pharmacies, ambulance rides -- grew by 1.7%. The previous year, it had grown by nearly 15%. 

Denver Health Medical Center lost $11.6 million between June 2019 and June 2020. Operating income for Denver Health overall was down 7%, or about $37 million, according to financial disclosure documents. The system had budgeted for an EBIDA of $38.8 million; instead, it was $12.1 million. 

Total patient service revenue was $93.4 million off budget. 

Rennell, of the hospital association, said there was "enormous" concern in the spring that some facilities would be forced to close. But he said intervention from the federal government helped stave off that fear for the time being. It's unclear if more federal money will come, if hospitalizations decrease, if people begin seeing doctors again for non-COVID issues, or if the pandemic slows.

"If hospitals, some of these vulnerable hospitals, if they continue to see utilization decreases and they continue to support COVID infrastructure, I’d expect more conversations about some of our rural hospitals are at risk for closure," he said. 

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