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NHMRC Seeing Cash Crunch Over Coronavirus

By Vicky Janowski, posted Mar 31, 2020
New Hanover Regional Medical Center is feeling the financial effects of the new coronavirus pandemic. (File photo)
The coronavirus pandemic is taking a toll on NHRMC’s finances as the hospital gears up for the possibility of treating more COVID-19 patients.
 
“We don’t close our March financials for another couple weeks, but I think March is going to be a very difficult month for us financially,” NHRMC president and CEO John Gizdic said. “And if this crisis and pandemic continues to play out over a longer extended period of time – weeks, months – it could be a very significant financial impact on our organization and our community.”
 
On March 20, New Hanover Regional Medical Center postponed non-essential surgeries. The move, “allows the health system greater flexibility to ensure staffing, space and resources are available as part of NHRMC’s proactive decision-making and preparation for impacts from COVID-19,” officials said at the time.
 
While it helps the system stock up on resources and personal protective equipment such as masks and gowns for providers, it also took some of the hospital’s most profitable services off the books.
 
On an average day, NHRMC previously did about 150 surgeries. “Right now we’re doing 50 to 60,” Gizdic said.
 
Going into the current situation, the hospital had 242 days cash on hand, or essentially enough money to cover daily operations for that amount of time.
 
“The stock market [drops] alone has eaten up about 45 days of that so we are now right around 200 days cash on hand,” Gizdic said. “One day cash for us is about $3 million. At 100 days cash on hand, I start tripping bond covenants.
 
“So in a worst-case scenario where we have no revenue coming in or very limited revenue coming in but we are trying to maintain our workforce, do what’s right for our organization and do what’s right for our community – at a $3 million a day burn rate with no revenue coming in, that’s 33 days. I think that starts to put things in perspective when we start talking about crises of this magnitude, and God forbid we have a storm this fall.”
 
During Hurricane Florence in September 2018, when NHRMC largely shut down for two weeks, the hospital lost $30 million that month.
 
Like NHRMC, officials with Novant Health, which owns Novant Health Brunswick Medical Center, also have been preparing for the volume dips.
 
“Novant Health anticipated a decline in revenue when we cancelled elective surgeries and non-essential appointments at the same time we’re making large investments to prepare for a surge,” a Novant Health spokesperson said in a statement. “While we are beginning to see the resulting impact, it was an easy decision to make. Novant Health will always put the safety of our patients and team members over economics.

"Our hope is all levels of government keep in mind the unique challenges healthcare systems are facing with every passage of relief funding or mandates. It’s critical that we’re able to conserve resources, like PPE [personal protective equipment] and staffing, during this crisis and we’re still able to continue caring for the needs of all patients after it passes.”
 
The local hospitals are not alone in the crunch. Health systems around the country are reporting drops in patient volumes from non-COVID-related cases and tighter revenues.
 
That’s led to furloughing workers for some hospitals, even at a time when they are trying to ramp up for an expected peak in cases and hospitalizations in the coming weeks.
 
Hospitals from Rhode Island to Kentucky in recent days have announced staff furloughs in the hundreds.
 
Closer to home, Cape Fear Valley Health in Fayetteville announced it temporarily furloughed about 300 staffers starting Sunday.
 
“I think you can find many, many, many other health care organizations around our state and around our country who are laying off hundreds of workers right now, and you know that historically has not been our approach,” Gizdic said. “We have always worked to protect our staff to have a no-layoff policy.”
 
NHRMC has about 7,500 employees, Gizdic said.
 
“Our staff are on the frontlines right now. They’re the ones that are really feeling the brunt of this whole situation, and so anything we can do to help protect them is really what we’ve been about,” he said.

Hospital officials said they could not disclose whether they've had any COVID-19 hospitalizations so far.

But whether they're working with COVID-19 patients or not, employees are feeling the effects.

"The areas that have seen their volumes cut back dramatically, we have asked those staff to become part of a labor pool where they can be reassigned to an area that might need extra help,” Gizdic said.
 
Others, he said, have been reassigned to areas the hospital never had before the current situation, such as staffing the front doors to take visitors’ temperatures.
 
“So that is the way that they do not have to use their PTO,” Gizdic said. “It’s a way for them to continue to get a paycheck and not impact their benefits, and so that is what we’re doing for as long as we can.”
 
He said furloughs are something the hospital would “try to avoid at all costs.”
 
“You know, we’ve not laid off a single person in 15 years. I sure wouldn’t want to start now,” Gizdic said. “As we are sitting here now, every model you look at is projecting a peak of patients sometime in the month of April, mid- to late-April. And at that point, it’s going to be an all hands on deck.
 
“To me, this is not too dissimilar to a hurricane … where we need everybody here, doing whatever we can to care for the community, and we’ll sort out the financials later,” Gizdic said. “That’s what we did with Hurricane Florence. That’s what we’ve done with every major crisis in this community, but at the same time I think it does start to demonstrate and illustrate the financial realities that we are facing as an organization, and quite frankly, it’s concerning.”
 
The revenue impacts highlight an issue Gizdic said he has been pointing out for years that despite the organization’s financial track record – it’s brought in more than $1 billion in revenue annually in recent years – it can be vulnerable operating on its own.
 
Officials have been discussing the future of NHRMC, a county-owned hospital, for months and earlier this month received six proposals from outside health groups interested in deals that could range from management offers to partnerships to acquiring the system.
 
Details of those proposals are expected to be released publicly sometime in the coming weeks, officials have said. The immediate timeline was delayed since the coronavirus concerns has delayed meetings of the Partnership Advisory Group, whose members are reviewing the proposals.
 
“From a financial perspective yes we are a large successful organization,” Gizdic said. “We’ve done well over the years. But we enter into a situation like this, where we could go for weeks or months without our profitable services but still wanting, and in my opinion needing, to pay our staff and keep our staff employed to maintain that workforce and do what’s right for them. That is an equation that doesn’t add up financially at the end of the day.”
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