Pandemic ravages community hospital finances
Lawrence General Hospital woes spotlight need for money
TWENTY PEOPLE lost their jobs this week at Lawrence General Hospital, as the hospital slashed its staffing budget by $6 million and eliminated 56 positions, though many were vacant. Hospital CEO Deborah Wilson warned that service cuts will be next.
With the hospital facing a $20 million deficit in 2021, on top of a $13 million loss last year, Wilson said in an interview, “We can’t cut our way out of this situation.”
For years, community hospitals have complained about low reimbursement rates that put them at a financial disadvantage compared to more well-funded academic and teaching hospitals. Now, some of these same hospitals have been ravaged by the COVID-19 pandemic. Hospital officials hope the pandemic will be a catalyst to make the structural changes that lawmakers have tried for years to accomplish without success.
“There’s no more time for thinking about it, looking forward to future years as to whether or not there can be a remedy for this unfair reimbursement situation,” Wilson said. “The time is now.”
Across the board, hospitals generally lost money during the COVID-19 pandemic, as they stopped performing elective procedures and saw fewer patients for non-emergency care. A lot of that revenue was made up by federal stimulus money. But the Center for Health Policy and Analysis found that the impact was uneven, with community hospitals showing the least profitability.
Lawrence General Hospital is the perfect example. Generally, MassHealth reimburses hospitals at a lower rate than the cost of care, so hospitals lose money on MassHealth patients and make it up from patients with commercial insurance. But in the low-income community that Lawrence hospital serves, 30 percent of its patient revenue comes from MassHealth, compared to 18 percent at the average Massachusetts hospital. In addition, the rates paid by commercial insurance are negotiated and are often higher in large hospital systems. Lawrence General Hospital gets some of the lowest commercial reimbursement rates in the state.
So the hospital was already financially weak pre-pandemic. With Lawrence becoming an epicenter of the pandemic, Wilson said, the hospital lost many of its non-COVID patients, while facing enormous expenses for setting up COVID testing services and caring for sick COVID patients. It lost money despite getting federal CARES Act funding last year.
State Sen. Barry Finegold, an Andover Democrat, delivered an impassioned speech during the Senate budget debate this week using Lawrence General’s situation as the impetus for urging lawmakers to provide immediate short-term funding for community hospitals and long-term structural reforms. Finegold said the disparity in commercial payer rates in minority communities like Lawrence “is a manifestation of systemic racism” in the insurance industry. He called it “modern-day redlining,” referring to racist banking practices that began in the 1930s of granting housing loans only in white neighborhoods.
Finegold proposed one budget amendment that would require insurers to reimburse community hospitals at the statewide average price for a procedure. Another amendment would have established a $100 million health equity fund to support healthcare in Gateway Cities.Finegold withdrew both amendments, but said he will continue to advocate for the use of federal American Rescue Plan funds to shore up community hospitals.
Senate Ways and Means chair Michael Rodrigues, responding to Finegold, according to a State House News Service transcript, pledged that he would look to the American Rescue Plan funds to help community hospitals. “We will absolutely look very, very closely at not just his hospital but at all community hospitals, safety net hospitals, in Gateway Cities around the state to ensure we help them in any way possible by providing them with much needed cash to sure them up and make sure they do not leave us or be forced to close,” Rodrigues said.