Kentucky hospitals will lose an estimated $2.6 billion this year because of the COVID-19 pandemic, according to a new report from the Kentucky Hospital Association.

With the virus present in all 120 counties, Kentucky hospitals and the caregivers who work for them are on the front lines of the battle against the virus. In addition to the great personal toll the virus is taking, the financial impact on hospitals has been profound, the report said.

These losses are the consequence of a drop in revenue resulting from the mandatory cancellation of elective procedures, which also resulted in furloughs for thousands of hospital employees; mandated limits on how many patients hospitals can accept; and lower patient volume due to the fact that many patients are not going to the hospital when they need to due to concerns about the virus.

In addition to the lost revenue, hospitals experienced additional costs in responding to COVID-19 as they geared up to treat COVID-19 patients, bought additional personal protective equipment, instituted enhanced environmental controls and tested and treated COVID-19 patients, who are hospitalized twice as long as the average patient.

The KHA report noted that, while the federal government provided financial assistance to hospitals to offset COVID-related costs, the assistance was less than half, or 40 percent, of the financial impact of the virus.

Kentucky’s rural hospitals, many of which were at risk of closure prior to the pandemic, are particularly vulnerable due to COVID-related costs. Several recent studies have found as many as 28 of Kentucky’s rural hospitals were at risk of closure before the pandemic. These hospitals serve almost half a million Kentuckians, have more than 4,900 employees, pay annual salaries of $276 million and provide $217 million in other economic benefits.

“The CARES Act and other spending packages passed by Congress earlier this year have done much to provide relief to UK HealthCare and other hospitals in the response to COVID-19,” said Dr. Mark Newman, University of Kentucky executive vice president for health affairs. “That relief, however, has not completely addressed the dual problems of decreased revenues while costs such as PPE, staffing and so on have increased significantly as health care providers work to keep patients safe.”

Rural hospitals face many economic burdens because they have fewer patients covered by private health insurance than hospitals in urban areas and rely more heavily on Medicaid and Medicare (which pay hospitals below their costs for treating patients).

Patrick Falvey, chief operating officer at Baptist Health agreed, “With federal assistance and the resumption of operations at nearly normal levels, larger hospitals and health systems have financially weathered the COVID-19 pandemic so far.” Falvey continued, “It’s been smaller, independent hospitals, with less of a financial support structure, that have been most affected.”

The report pointed out that all of the state’s hospitals are a vital part of the economic health of Kentucky communities. The largest private employer in many counties, hospitals employ more than 78,000 workers across Kentucky and pay $4.9 billion in wages annually. They, along with their employees, also support government by paying over $700 million in state and local taxes. This includes $183 million in provider taxes the hospitals pay that support the Medicaid program.

In developing the report, KHA is asking policymakers to support Kentucky’s hospitals and the 78,000 healthcare professionals and caregivers who work for them.

“We expect the pandemic, and its impact,  to stretch into 2021, further straining balance sheets due to the high cost of keeping patients and staff safe – including spiraling prices for PPE and increased expenditures for screeners and stringent cleaning protocols – and the economic realities of the unemployed who may delay seeking care until they are very ill,” Falvey said. “Hospitals will need similar financial relief in the coming year. Forgiving the Medicare Advance Payments will go a long way toward providing that needed relief to keep hospitals financially healthy and able to continue maintaining a strong frontline during this pandemic.”

“This request for support does not come in the form of a proposal for more funding or special treatment,” the report noted. “We fully recognize the negative impact that the COVID-19 shutdown has had on businesses and individuals across the commonwealth.

“Instead, we ask that efforts by the Governor and the General Assembly to address the reduced revenue caused by the pandemic do not compound hospitals’ financial crises by imposing additional provider taxes, cutting Medicaid reimbursement or similar actions.”

It is essential that Kentucky’s hospitals are financially strong as they continue the battle against COVID-19 and provide quality care for their patients, the report concluded.

The Impact of COVID-19 on Kentucky Hospitals

Key Points

• More than $2.6 billion in revenue losses and additional costs from cancellation of elective procedures, responding to the virus and treatment of COVID-19 patients.
• More than 3,000 hospital employees furloughed.
• Lower patient volume continuing.
• Rural hospitals at risk of closure.

Key Takeaways

• Kentucky was one of the first states to cancel elective procedures, which generate revenue to cover services hospitals provide at a loss.
• In order to re-open elective procedures, hospitals must keep 30 percent of their beds in reserve in case a spike in COVID-19 patients occurs.
• Hospitals continue to have lower patient volume because many individuals are not seeking care due to concerns about the virus.
• Hospitals are using more PPE, which is often in short supply, and are having to pay higher prices to obtain what they need.
• Hospitals incurred costs to reconfigure their facilities to create COVID-19 units, install barriers for social distancing and create additional patient care space to be ready for spikes in COVID-19 cases.
• COVID-19 patients are more costly to treat and most hospitals lose $1,200 for every COVID-19 hospitalized patient.
• Kentucky hospital losses in 2020 are estimated to exceed $2.6 billion, yet federal relief funds have covered less than one-half of that amount.
• Despite these losses, hospitals that requested Medicare payment advances to help with cash flow during the elective procedure shutdown must now continue treating Medicare patients without receiving any Medicare payment until the advances are repaid.

Request to Policymakers

• Don’t impose additional provider taxes or cut Medicaid reimbursement.
• Ensure that Kentucky’s hospitals are financially strong so they can continue the battle against COVID-19 and provide quality care for their patients.
• Make sure that addressing the commonwealth’s budget problems does not come at the
• expense of Kentucky’s hospitals and the people who care for our citizens.

View the full report at kyha.com.