Hansen Family Hospital has spent more than a year building its income statement. For 12 months straight, its recorded positive bottom lines and improved its performance - even over other critical access hospitals of similar size.
Now all of that progress is being undone by the coronavirus pandemic.
At two meetings this month the hospital’s board of trustees has met to discuss the HFH financial situation. At the end of February the hospital had recorded a year-to-date profit of more than $520,000. Leaders were projecting a fiscal year-end bottom line of about $800,000. But just one month later, on March 31, the hospital’s year-to-date profit sunk to $297,000, and hospital leaders are now projecting HFH will end the fiscal year with a loss of $2.5 million. March alone ended in the red with a loss of $232,000.
But they’re not going to let that happen without a fight.
“So the question is what are the interventions we’ll do to accommodate for that loss,” HFH CEO Doug Morse said at an April 17 meeting.
The hospital, which does not receive tax support, and instead relies entirely on payments - from patients, insurance companies and Medicare/Medicaid - for services it provides, has seen a significant drop in the number of patients being seen. Not only have elective procedures been stopped amid the spread of COVID-19 in Iowa, but many people are avoiding the clinic, and limiting other visits to the hospital. Just as those money-making activities have slowed or stopped, the hospital’s expenses have either remained steady or increased.
“We started out with the tent in parking lot,” HFH CFO George Von Mock told the board during its regular monthly meeting April 22. “For security purposes, and helping with directing patients and visitors where to go for care, we had our security firm Quaker Security on site 24/7 for several weeks. That was scaled back a little, but we’ve ramped that up a little bit going forward.”
And, Von Mock said in his review of the financials, March included only about 12 or 13 days of COVID-19 response at the hospital.
“The month was really an indicator of turning off the spigot when it comes to revenue,” he said. “And we’ll see more of that in April, unfortunately.”
But the losses won’t stop with this month, or even next month. Morse, using a graph provided by the hospital’s accounting firm, Clifton Larson Allen, showed that the hospital is looking 18 months into the future.
“Our old baseline we’re looking at entirely differently,” Morse told the board last week after first presenting the graph the week before. “We’re viewing it now in separate phases. The dip phase, as things turn, as we hopefully recapture, and then our new post-COVID reality. Where we are now is the dip phase. We’re still in a time where we’re following the governor’s and other executive orders . . . it has caused a significant dip in the revenues, but we’re planning around it. We’re waiting for a period where we’ll get into the turn and the balance.
“This won’t be an easy or a fast process,” Morse cautioned, “but we are now viewing it in specific phases, which gives us action steps every step of the way.”
One of those action steps is what prompted the April 17 meeting. The hospital applied for - and received - funding through the federal government’s Payroll Protection Program (PPP). That fund provided $2.1 million to the hospital to pay employees through June 30. Morse said the hospital also received a payment about about $600,000 through the CARES economic stimulus act. Von Mock and Morse said the hospital is also flexing employee hours to meet patient volumes, encouraging employees to use PTO when appropriate.
The hospital is also working on possible adjustment to its cost report, which goes to the CMS (Centers for Medicare and Medicaid Services), and it is working with MercyOne North Iowa on its fees associated with the hospital's management agreement.
And while the hospital does have cash in the bank, and cash reserves set aside to pay its debt obligations - especially payments on the county and city bonds that helped pay to build the hospital in 2014 - Morse said there have been conversations with the bond administrator about what could be done should the hospital's losses continue into September, October and November. Morse said the hospital would be able to continue to meet its bond payments, but some of the bond covenants - the requirements about around the borrowed money - could be temporarily waived.
"There’s appreciation from the bond administrator, we have a bond attorney working with them," Morse said on April 17. "Because right now we’re able to say our plan calls for meeting payments, if there’s any breach on the covenant ratios they’ve talked about potentially waiving those for a short period of time."