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The fall in revenues comes alongside increases in costs to prepare for COVID-19. Patients suspected of COVID-19 have to be treated as if they are infected until the hospital gets confirmation of a negative test, which has increased the hospital\u2019s utilization of personal protective equipment (PPE), such as N95 masks. Masks used to cost around 95 cents each. The price has now spiked to around $3 each (some sellers are asking for $5 or more, Peterson said, which would push costs up even further if the hospital ever faced a shortage and had to seek additional sellers). Testing remains a challenge, as the hospital is still unable to test on-site. Initially, tests sent to the Arkansas Department of Health in early March had a 6-to-8 day turnaround, but that has more recently improved to 24 to 48 hours, Peterson said. <\/p>\n\n\n\n
Like many of the state\u2019s rural hospitals, Baxter Regional\u2019s fiscal situation was already tight before the crisis. \u201cFor the last several years, we\u2019ve had a 2-percent operating margin,\u201d Peterson said. \u201cThat\u2019s the average, if you\u2019re lucky. There\u2019s several rural hospitals that I don\u2019t even believe have that kind of operating margin. But that\u2019s a very slim margin and when you start dropping 30 to 35 percent of your volume, you have to take a look at how can you keep the organization sustained and survive.\u201d<\/p>\n\n\n\n
The hospital normally operates in the black on a monthly basis, but for the month of March, the hospital was $1.4 million in the red; the projection for April is a shortfall of $6 to $6.5 million. May could likely be even worse, Peterson said. <\/p>\n\n\n\n
On April 6, the hospital announced a series of cuts to deal with the temporary shortfalls related to COVID-19: a hold on annual market-based pay increases, reductions in salary for executives and the leadership team, reduction in hours for many workers, a hiring freeze for noncritical positions and furloughing 105 employees. Those furloughed will continue to receive health insurance from Baxter Regional and will be eligible for unemployment compensation. Friday, Baxter Regional announced another round of 175 furloughs, bringing the total to 280. The number of positions that have been left vacant under the hiring freeze is up to 70. The hope is that all of these moves will be temporary. The hospital stated in a press release: \u201cBaxter Regional realizes that these are difficult days for our nation, state, local community and organization but is confident we will get through this together and overcome these challenges.\u201d<\/p>\n\n\n\n
When the health care industry takes a hit, it has a profound impact on the local economy, Peterson said. Prior to the cuts, Baxter Regional employed around 1,700 people, making it by far the largest employer in the community. One in four jobs in Baxter County are health-care related, including the hospital and independent providers. <\/p>\n\n\n\n
Peterson said that he anticipates volume will pick up in the near future. \u201cThe drop can only go on for so long,\u2019 he said. \u201cHealth care services can be delayed, but I believe there will be pent-up demand and there\u2019s going to be a burst at some point.\u201d In this way, rural hospitals face a dilemma not dissimilar to small businesses like restaurants \u2014 demand for services that doesn\u2019t exist now will be coming soon, but without significant cash reserves or huge margins from previous years, the immediate revenue hit makes it hard to stay afloat. \u201cYou have to look at how you survive and<\/em> be prepared for the surge and the influx weeks later,\u201d Peterson said.<\/p>\n\n\n\n In his daily conference on Thursday, Governor Hutchinson said that renewing more nonemergency activity at hospitals was one of his priorities in re-opening the state\u2019s economy. \u201cThe first thing we look at is the challenge that so many of our hospitals and clinics have had in putting off elective surgery,\u201d Hutchinson said. \u201cWith 80 [COVID-19] hospitalizations in our state, we\u2019ve got a lot of idle hospitals, so we want to get them back to doing the health care delivery that\u2019s important in their communities.\u201d <\/p>\n\n\n\n On Friday, the governor announced that May 4 is the goal date to begin Phase One of re-opening the economy, with recommendations for various sectors of the economy to resume certain activities. That would include elective surgeries at hospitals. It is even possible that the state could authorize hospitals to begin elective procedures prior to the beginning of Phase One, state officials said. <\/p>\n\n\n\n In the meantime, hospitals like Baxter Regional also must prepare for the possibility of a COVID-19 outbreak. As of April 20, there have been just five confirmed cases in Baxter County and one in Marion County, the hospital\u2019s primary service areas. \u201cThank goodness, and hopefully a surge does not happen, but you do have to plan for that,\u201d Peterson said. The hospital has a team dedicated to COVID response which has been meeting daily since the first confirmed case in Arkansas on March 11. In the case of a surge of COVID-19 cases, the hospital has 49 beds that could be used to treat COVID patients, in rooms that could be converted to have negative air pressure to contain the virus, including nine in the ICU. The hospital has 17 ventilators and 17 anesthesia machines. Additional beds could potentially be converted if a surge stretched that capacity, including an additional eight ICU beds \u2014 in which case small critical access hospitals in the region could help by taking on non-COVID patients. <\/p>\n\n\n\n In the governor\u2019s press conference Friday, Arkansas Secretary of Health Nate Smith said that ensuring that hospitals are ready to treat COVID patients depends on keeping them financially stable in the short term. <\/p>\n\n\n\n \u201cWe\u2019ve seen decreased numbers of patients in the hospitals, which means decreased revenues and decreased staffing,\u201d Smith said. \u201cFor us to be able to take care of patients with COVID-19, as well as other medical and surgical conditions, we need to have fully staffed and robust hospitals and other health care facilities.\u201d <\/p>\n\n\n\n In addition to the federal stimulus payments from the CARES Act and the block grant aid from the state, Arkansas has also initiated a $75 million program, paid for with the governor\u2019s rainy day fund, to provide PPE to health care providers. Baxter Regional received its first shipment last week, including around 2,400 gowns and 26,000 gloves, with more expected soon. <\/p>\n\n\n\n The state and federal government have also established plans to advance money now to help with immediate cashflow that hospitals and other providers will eventually repay. Arkansas has delayed Medicaid-related payments that hospitals would normally owe the state now until June, and the federal government has fronted Medicare reimbursement payments now that providers can pay back later this year. <\/p>\n\n\n\n \u201cWe appreciate everything that\u2019s being done, and it\u2019s all been beneficial,\u201d Peterson said. \u201cBut hospitals in rural areas that are large enough to be able to handle COVID patients and are operating on very thin margins \u2014 it\u2019s a very difficult time for us at this moment.\u201d If the revenues don\u2019t turn around soon, he said, it could threaten the ability of Baxter Regional and similar hospitals to sustain themselves in their current form. \u201cIt could change the landscape of hospitals in rural Arkansas, there\u2019s no question,\u201d he said. <\/p>\n\n\n\n \u201cIt\u2019s a bleak picture right now,\u201d Ryall said. \u201cI\u2019m hearing from hospitals that got their March numbers, and looking toward April and May it\u2019s going to be devastating. That\u2019s why you\u2019re seeing the furloughs and cuts. Hospitals are just trying to survive to when the patients do come back.\u201d <\/p>\n\n\n\n