Safety net hospitals, health centers teetering on the brink

Pandemic is choking revenue flow to providers on the front lines

DR. ERIC DICKSON oversees a sprawling health care system that cares for lots of low-income families throughout central Massachusetts, many of whom are wondering how they’ll pay their rent or afford groceries after suddenly losing their income in the avalanche of job losses being unleashed by the coronavirus pandemic. Without help, the CEO of UMass Memorial Health Care says his hospital system could soon be in the same boat.

“A week out of work is unimaginable for them, let alone two months,” Dickson said of the lower-income patients his network serves. “Well, the same is true for the hospitals in Massachusetts that care for a high percentage of underserved, socially and economically fragile patients. We’re in the same situation.”

Just as the coronavirus is poised to exact a greater toll on the poor and other marginalized populations, its impact is not being felt evenly across the state’s health care landscape.

Leaders of safety net hospitals throughout Massachusetts that care for the state’s most vulnerable residents say the COVID-19 crisis threatens to push them over a financial cliff, squeezing dry their revenue streams as they mount an all-out effort to prepare for an expected surge in critically ill patients.

Unlike family breadwinners who have suddenly found themselves unemployed, Worcester-based UMass Memorial, with 1,100 beds across three busy hospitals, is hardly out of work. But its income stream is taking a huge loss as the system cancelled all elective surgeries and many other clinical appointments in order to free up capacity for coronavirus patients.

Hospitals and outpatient clinics across the state have done the same. But like those families with little or no savings to fall back on, hospitals like UMass Memorial that operate on very thin margins are in a far more precarious position than Boston’s big teaching hospitals and other providers with higher shares of privately insured patients.

March 25, 2020

Dr. Eric Dickson, left, president of UMass Memorial Health Care, meeting on Wednesday — at safe distance — with Neil McDonough, chairman of Flexcon, a Spencer manufacturer that donated 1,000 plastic shields to be used as protection masks. (Photo courtesy of Anthony Berry)

Dickson said revenue at UMass Memorial might be down as much as 40 percent. That’s an enormous hit to absorb in a system that reported an operating loss of $10 million last year. Dickson said UMass Memorial is in a better position than other safety net providers because it sold off some assets last year, including a large stake in a specialty pharmacy company, in order to build reserves.

For other hospitals, he said, without immediate help the coronavirus crisis “is going to be devastating.”

One of those is Lawrence General Hospital, which has seen a similar falloff in revenue, with total patient charges dropping from $1.5 million per day to about $900,000 per day, according to Deborah Wilson, the hospital’s president and CEO. “That is a hit of 40 percent of our revenue based on one week of volume information,” she said. “It is staggering. It is not anything we can deal with on our own.”

The $2 trillion stimulus plan that cleared the US Senate late Wednesday night includes $130 billion for hospitals and other health care providers, but it’s not clear how that money will be distributed.

“I hope the stimulus bill money will primarily be used to shore up safety net health care systems, as they and their underserved patients will be the ones primarily impacted by the COVID-19 crisis,” said Dickson, who trained as an emergency room physician and is the incoming chairman of the board of the Massachusetts Hospital Association. “I worry that systems with the loudest voice and the best lobbyists will fare better than those that really need the help.”

Safety net hospitals are financially vulnerable because of their patient population and often weaker leverage in the health care market.

MassHealth, the state Medicaid program for poor residents, pays substantially less for services than do private insurance companies. Dickson said MassHealth pays about 60 percent of the actual cost of services at UMass Memorial. Private insurers pay more than the actual cost of care, in effect cross-subsidizing the care given to Medicaid patients.

The problem for UMass Memorial is that MassHealth patients account for 26 percent of its patient load, roughly twice the share of major Boston teaching hospitals. At Lawrence General, Medicaid recipients account for 30 percent of the patient population, the highest share of any community hospital in the state.

Even for commercially insured patients, where rates are negotiated with insurance companies, there are big disparities, with Lawrence General paid 73 percent of the state average, said Wilson, the third lowest of any hospital in the state. The hospital lost $11.7 million last year, due largely to changes in MassHealth payments, said Wilson.

“There was a big problem before the crisis, and now it’s just getting magnified,” said Dickson, who has been an outspoken advocate of payment reform to boost MassHealth reimbursements and even the rates paid to hospitals by commercial insurers.

COVID tent at UMass Memorial Health Center in Worcester, where potential coronavirus patients are evaluated. (Photo courtesy of Anthony Berry)

Last Friday, the Baker administration announced it was releasing $200 million in “accelerated payments and cash advances” for acute care and safety-net providers in response to the coronavirus epidemic.

The stopgap measure will be crucial, said James Hunt, Jr., president of the Massachusetts League of Community Health Centers, which represents 52 health center organizations, where MassHealth recipients account, on average, for half of all patients. With estimates that revenue could be off by 50 to 70 percent at health centers, which have been cancelling all but the most urgent appointments, Hunt said some clinics started the week with less than five days of cash on hand to meet payroll and other expenses.

“It is an infusion to keep the doors open,” he said of the MassHealth payments, which began appearing in health center accounts on Tuesday. But since these are advance payments on future Medicaid care, it only delays the financial reckoning. “We will have to negotiate the terms of when those funds will need to be paid back, but it can’t be soon,” said Hunt.

As with hospitals, Hunt said the health centers are anticipating some financial relief in the federal stimulus package. Hunt was on a national conference call on Tuesday with Health and Human Services Secretary Alex Azar and the chief federal official dealing with community health centers. He said they assured participants on the call that safety net providers would be prioritized in the federal aid package.

“The question is how much and when,” said Hunt.

While worrying about the financial strain their hospitals are under, Wilson and Dickson said their focus has been on preparing for the surge in patients that is expected over the coming days.

Both hospitals have tents set up outside their emergency rooms where potential coronavirus cases are evaluated. Lawrence General also has a drive-through testing site.

On Monday, Dickson was preparing to help staff the UMass Memorial COVID-19 tent until 11 pm once he finished his daytime duties juggling administrative issues. His wife is also an emergency medicine physician in the UMass Memorial system, and Dickson said they’ve already designated the home office above their garage as the place they’ll quarantine should either of them get infected with the coronavirus.

At the start of last week, he said, UMass Memorial had seen four positive cases, with one hospitalized. As of this Monday, the number of cases had jumped to 49, with nine sick enough to be hospitalized. “If it just doubles in a week, we’ll be great,” he said of the inpatient count looking ahead. “If it goes up nine-fold again, that’s downright scary.”

At Lawrence General, Wilson said, “we are preparing daily for surge capacity and working to expand our capacity.”

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Michael Jonas

Executive Editor, CommonWealth

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

About Michael Jonas

Michael Jonas has worked in journalism in Massachusetts since the early 1980s. Before joining the CommonWealth staff in early 2001, he was a contributing writer for the magazine for two years. His cover story in CommonWealth's Fall 1999 issue on Boston youth outreach workers was selected for a PASS (Prevention for a Safer Society) Award from the National Council on Crime and Delinquency.

Michael got his start in journalism at the Dorchester Community News, a community newspaper serving Boston's largest neighborhood, where he covered a range of urban issues. Since the late 1980s, he has been a regular contributor to the Boston Globe. For 15 years he wrote a weekly column on local politics for the Boston Sunday Globe's City Weekly section.

Michael has also worked in broadcast journalism. In 1989, he was a co-producer for "The AIDS Quarterly," a national PBS series produced by WGBH-TV in Boston, and in the early 1990s, he worked as a producer for "Our Times," a weekly magazine program on WHDH-TV (Ch. 7) in Boston.

Michael lives in Dorchester with his wife and their two daughters.

At the same time, she said, the hospital has a “cash on hand level that is below what we need to have to manage the organization through this crisis.  We cannot absorb the fiscal impact without support from the state and the federal stimulus bill.”

Dickson returned to the analogy of the dire straits facing lots of patients his hospitals treat. “Some families go a week without a paycheck and it’s a crisis, while others could sustain themselves for a year. It’s the same for hospitals. It’s really scary to think what could happen.”