Fearing hospital bankruptcy, Gov. Wolf offers $450M in loans to financially strapped providers
Gov. Tom Wolf on Friday announced more than $450 million in low-interest loans meant to keep hospitals afloat as they continue to lose revenue amid the coronavirus pandemic.
Hospitals statewide have canceled elective surgeries and nonurgent procedures to free up bed space and limit the spread of covid-19. At the same time, they have shifted medical equipment and other resources to meet the state’s virus needs.
Wolf said that combination of increased costs and decreased revenue has shaken hospitals financially.
“We cannot allow our hospitals to go bankrupt,” he said.
The loan package — the Hospital Emergency Loan Program — will provide immediate funding to hospitals, according to the governor’s office. The funding is from the Pennsylvania Infrastructure Investment Authority (PennVEST) and will be administered by the Department of Community and Economic Development.
Though some may be struggling more than others, hospitals statewide have seen their revenues drop by an average of 40% in the weeks since the statewide shutdown and cancellation of elective and nonurgent procedures, the Hospital Association of Pennsylvania reports.
“We see the same type of impact that hospitals across the state and across the nation see from the reduction of elective services,” said Richard Chesnos, chief financial officer of St. Clair Hospital, a 329-bed facility about 6 miles south of Downtown Pittsburgh that supports 120 physicians and employs about 2,500.
He would like to see the state go a step further and create an emergency response fund to support the continuum of care — including not only hospitals but also other providers such as physicians practices, long-term care facilities and post-acute care centers.
Another big help would be for the state to cancel the next two monthly quality assessments — effectively a fee or tax paid by hospitals to the state. Doing so for the payments due May 1 and June 1 would save St. Clair Hospital more than $3 million, Chesnos said.
As of 4 p.m. Friday, more than 2,000 people were hospitalized with the virus across the state, and nearly 600 were on ventilators, according to Department of Health data.
“Hospitals across Pennsylvania should be focused on saving lives, not worrying about how to make ends meet until federal relief funds arrive months from now,” said state Treasurer Joe Torsella, whose office must approve any investments made by the PennVEST board.
The maximum loan for any one hospital is $10 million, with an interest rate of 0.5%.
St. Clair Hospital, with about $365 million in annual operating income and more than $450 million in net assets, is in “a stronger position than a lot of the hospitals are,” Chesnos said. He’d like to avoid taking on interest payments unless absolutely necessary.
The state program is meant to provide hospitals relief until federal funding through the Coronavirus Aid, Relief and Economic Security Act (CARES Act) is made available.
”It’s a good start,” said Chesnos, “but there still needs to be additional legislation to help hospitals, both at the state and federal levels.”
Federal funding begins flowing to all hospitals
Separately, officials learned that U.S. hospitals and health care providers will share in $30 billion from the first round disbursed via the CARES Act federal government’s coronavirus relief stimulus package.
A total of $100 billion is earmarked for health care providers in the legislation.
More than 12,600 Pennsylvania health care facilities will receive a total of $1.25 billion via the initial round, according to U.S. Sens. Bob Casey, D-Scranton, and Pat Toomey, R-Lehigh Valley. It was not clear late Friday precisely how much each hospital will get.
“That will ease some of the pain, but there’s so much more to do,” Chesnos said.
Excela officials said they were “disappointed” that the funding formula used for the first round did not follow a proposal of $25,000 per hospital bed, as advocated by the American Hospital Association. They pointed out that the Centers for Medicare Services excluded Medicare Advantage revenue from the formula.
“This will significantly reduce funds received by all Western Pennsylvania hospitals, which has one of the highest percentages of Medicare Advantage enrollees in the United States,” Excela CEO Tom Albanesi said in a statement. “We are hopeful that we can persuade CMS to correct this oversight in the next round of supplemental funding by utilizing a formula that acknowledges areas with heavy Medicare Advantage penetration.”
UPMC spokeswoman Erin Hare said officials still are evaluating the amounts and types of funding that their facilities may be getting or seeking. She expected to have more details by next week.
By Megan Guza and Natasha Lindstrom – Reporters, Tribune Review